Inheritance tax Spain: Essential guide for non residents

If you own property in Spain, there's something you need to know. Your beneficiaries might face a substantial inheritance tax Spain bill when the time comes – we're talking up to 34% of the property value in some cases. But here's the thing: with the right approach, this tax burden can be reduced to almost nothing.

At Manor Tax, we've spent years helping international families deal with Spanish inheritance tax. The system is complex, yes, but once you understand how it works, you can make informed decisions that protect your family's wealth.

What exactly is Spanish inheritance tax?

In Spain, inheritance tax goes by the name "Impuesto de Sucesiones y Donaciones" or ISD. It's fundamentally different from what many expats expect. Each person who inherits pays tax on what they receive – not the estate itself. This means your spouse, children, and other beneficiaries each handle their own tax bills.

The Spanish Tax Agency sets the framework nationally, but – and this is crucial – each of Spain's 17 autonomous regions tweaks the rules. Madrid might charge you next to nothing. Asturias? That's a different story entirely.

When non-residents face Spanish inheritance tax

There's a common misconception among property owners: "I don't live in Spain, so Spanish taxes don't apply to me." If only it were that simple. The reality of inheritance tax in Spain for non residents is more nuanced.

You'll pay Spanish inheritance tax if:

As a non-resident, Spanish inheritance tax kicks in when you inherit:

• Any assets physically located in Spain (property, bank accounts, shares in Spanish companies)
• Assets anywhere in the world, if the deceased was a Spanish tax resident
• Spanish property or assets given as a gift during someone's lifetime

For Spanish tax residents

If you're a Spanish tax resident, the net is cast wider:

• All inheritances, wherever they come from
• Gifts received from anyone, anywhere
• Life insurance payouts

Are you a Spanish tax resident? You are if you spend more than 183 days per year in Spain. Also, if your spouse and kids live in Spain, the tax authorities usually assume you're resident too – unless you can prove otherwise.

Breaking down the tax rates

Spanish inheritance tax uses a sliding scale. The more you inherit, the higher the percentage. But these national rates? They're just the starting point. Your actual bill depends heavily on where in Spain the assets are.

National inheritance tax rates (2025)

Inheritance value (€)	Tax rate
0 - 7,993	7.65%
7,993 - 31,956	8.5%
31,956 - 79,881	11.05%
79,881 - 239,389	15.6%
239,389 - 398,778	21.25%
398,778 - 797,555	25.5%
Above 797,555	34%

Your personal allowance

Before any tax applies, you get a tax-free allowance. How much? Depends on your relationship:

• Kids under 21: €15,956.87 plus €3,990.72 for each year they're under 21 (max €47,858.59)
• Adult children, parents, spouses: €15,956.87
• Siblings, aunts, uncles, nephews: €7,993.46
• Cousins and non-relatives: Zero allowance

The regional lottery: Why location changes everything

This is where Spanish inheritance tax gets interesting – and potentially very expensive or very cheap. Some regions have basically scrapped the tax for families. Others? Not so generous.

Madrid takes the crown

Madrid leads with a massive 99% reduction for children, parents, and spouses. Inherit a €2 million property? You might pay less than €2,000 in tax. And as of 2025, even siblings and nephews get 50% off (up from 25% last year).

Andalusia's million-euro promise

Andalusia went big in 2022:

• First €1,000,000 completely tax-free for close family
• Everything above that? 99% discount
• Even distant relatives get better deals than the national rules

The rest join in

Valencia, the Balearics, and the Canary Islands have all introduced similar schemes recently. It's become something of an arms race to attract retirees and their families.

How to legally reduce Spanish inheritance tax

Nobody wants to pay more tax than necessary. Spanish law offers several legitimate ways to protect your family's inheritance. These aren't loopholes – they're built into the system.

1. Location strategy

Where you buy matters as much as what you buy. A property in Madrid or Andalusia could save your heirs tens of thousands compared to other regions. We've seen families actually relocate within Spain for the tax benefits.

2. Ownership structures that work

• Joint ownership: How you hold property affects the tax bill. There are pros and cons to different arrangements
• Life insurance: Spanish-compliant policies can provide cash for taxes without increasing the taxable estate
• Company ownership: Sometimes holding property through a company makes sense, though it's not for everyone

3. Regional residency planning

Planning to retire to Spain? Where you establish residency matters. Live in Andalusia for five years and your family gets that €1 million exemption. It's worth thinking about.

4. International coordination

Many clients worry about double taxation – paying in Spain and their home country. Tax treaties usually prevent this, but you need to structure things properly. We regularly work with advisors in other countries to ensure our clients don't pay twice.

Deadlines you can't afford to miss

Spanish bureaucracy doesn't wait for anyone. You have exactly six months from the date of death to file and pay inheritance tax. Miss it, and things get expensive quickly.

Late payment consequences

• Interest starts immediately (around 3.75% annually right now)
• Penalties between 50% and 150% of the unpaid tax
• Can't access the inheritance – bank accounts frozen, property transfers blocked

Getting an extension

You can request six more months, but only if you ask within the first five months. And you need good reasons – "we didn't know" won't cut it.

How Manor Tax helps navigate the maze

Spanish inheritance tax is complicated enough when you speak the language. Add in 17 different regional rules, international considerations, and tight deadlines? That's where we come in.

Our inheritance tax services include:

• Precise calculations – we know the rules in every region and apply them to your specific situation
• Document handling – all the Spanish forms, properly completed and submitted on time
• Tax optimization – ensuring you claim every exemption and reduction available
• International coordination – working with your home country advisors to prevent double taxation
• Deadline management – no nasty surprises or penalty charges
• Future planning – structuring your affairs to minimize tax for the next generation

We work hand-in-hand with our immigration team for residency issues and our property experts for real estate matters. Everything under one roof.