What taxes do I have to pay when receiving an inheritance?

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When an inheritance is received, the heirs have to pay inheritance tax. However, since this tax is assigned to the autonomous communities, there are great differences from one community to another, so that in some, there is hardly any payment for the inherited assets, while in others the tax cost is higher.

What is an inheritance?

Heredity is the set of assets, rights and obligations that are passed on to the heirs when a person dies. The testament establishes what and who inherits the deceased person’s assets, taking into account that the children, parents and spouse are legally binding heirs. There’s also limits on the distribution of inheritance: the legitimate one that is reserved to the forced heirs must add at least two thirds of the inheritance, of which one third is distributed equally and the third of improvement is distributed according to the will of the testator. Finally the remaining third, known as freely available, can be freely distributed.

When there is no will, the law indicates who are the legitimate heirs, which are the people, natural or legal, who have the right to receive the inheritance.

Taxes when receiving an inheritance

The taxes that are paid when receiving an inheritance vary depending on the assets that are inherited. In the case of financial assets, as an investment fund, you have to pay the inheritance tax. On the other hand, if it is a pension plan, you do not have to pay this tax, but you will have to declare the earnings as income from work when the plan is redeemed.

On the other hand, if a real estate, the heir has to pay the inheritance tax of the community in which the house is located and, in addition, the Tax on the Increase of the Value of Urban Land, also known as municipal capital gain.

Inheritance tax

Inheritance tax taxes the increase in equity that the heir obtains with the acceptance of the inheritance. State law establishes how the tax is calculated generally, but the autonomous communities they have skills to apply reductions and different ratesTherefore, there are great differences from one community to another.

While in some communities 99% bonuses have been established (that is, taxes are paid only on 1% of what is inherited), in others the tax can be quite high. It is important to note that you can’t choose where to pay the tax; It has to be in the community in which the deceased lived for the past five years.

In addition, it is a personal tax, that is, that the heir must pay, and progressive, which means that the more you inherit, the greater the tax burden, according to a scale that ranges from 7.65% to 34%.

It is also subjective, because varies according to the degree of kinship of the heirs with the deceased. The lower the degree of kinship, the higher the tax cost for the heir.

When the autonomous community has not set reductions in the tax, the following apply state reductions:

  • Group I: descendants and adoptees under the age of 21, € 15,956.87, plus € 3,990.72 for each year until age 21, with a limit of € 47,858.59. For example, a 15-year-old child would have a reduction of € 39,901.19, the result of adding € 15,956.87 (the base) and € 23,944.32 (€ 3,990.72 multiplied by 6, which are the years left until turn 21).
  • Group II: descendants and adoptees over 21 years of age, spouses, ascendants and adopters, the reduction is € 15,956.87.
  • Group III: second and third degree collaterals, ascendants and descendants by affinity, the reduction limit is € 7,993.46.
  • Group IV: collaterals of fourth degree or higher, there will be no reduction.
  • Disability reduction € 47,858.59 to people with a degree of disability equal to or greater than 33% and € 150,253.03 if the disability is greater than 65%.
  • Life insurances. 100% reduction, with a limit of € 9,195.49, to the amounts received by the beneficiaries of life insurance contracts, if they are spouse, ascendant, descendant, adopter or adopted.

Inheritance tax by autonomous community

Autonomous community Bonuses Reductions
Andalusia Group I and II: 99% Group I and II up to € 1,000,000

Groups III and IV € 250,000

Aragon Group I and II: 65% acquisition of a home with a value less than € 300,000. 100% limit € 3,000,000 for minors.

100% spouse, ascendant and descendants limit € 500,000

Asturias Between 95 and 99% depending on the value of the inherited home Group I and II: € 300,000.
Balearics Rates from 7.65% to € 8,000 to 34% from € 800,000. Group I: € 25,000 plus € 6,250 for each year under 21, limit € 50,000.
Group II: € 25,000
Group III: € 8000
Group IV: € 1000
Canary Islands Group I: 99.9%
Group II: 99.5% up to 55,000
All groups: € 300,000
Cantabria Group I and II: 100%.
Groups II and IV: 90%.
Catalonia Group I and II: between 57% and 99% depending on the tax base.
Spouses 99%.
Group I: € 100,000 child and spouse; € 50,000 other descendants; € 30,000 ascendants.
Group III: € 8000
Castile and Leon 99% (pending) Variable up to € 400,000.
Castilla la Mancha Group I and II: from 80% to 100% depending on the tax base.
Valencian Community Group I: 75% under 21 years of age.
Group II: 50%
Group I: € 156,000
Group II: € 100,000
Estremadura Group I and II: 99%
Galicia 100% up to € 1,000,000 from 2020 Group I: up to € 1,000,000 plus € 100,000 for each year under 21 years of age.
Group II: between € 900,000 and € 400,000 depending on age.
Group III; between € 16,000 and € 8,000
The Rioja 99% if the taxable base is less than € 500,000.

98% if it exceeds that amount.

Madrid Groups I and II: 99%
Group III (siblings): 15%
Group III (uncles and nephews) 10%
Murcia region Group I and II: 99%
Navarre Spouse 0% in the first € 250,000 and between 2% and 16% ascendants or descendants.
Basque Country Group I and II: first € 400,000 tax exemption at 1.5%.

Gift tax

Gift tax differs from inheritance because goods are delivered free of charge while alive, as if it were an advance of the inheritance, so that when the death occurs, the amount donated will be subtracted from the inheritance. In addition, no more can be received by donation than would correspond to the heir in the inheritance.

The donation tax is also assigned to the autonomous communities. Unlike inheritance tax, It is paid in the community where the person who receives the donation resides, except in the case of a home, in which case it is paid in the community where the home is located.

The term to pay this tax is only 30 days from when the donation is received.

Loans between individuals. It is the alternative to avoid paying donation tax. It is a loan between individuals at 0% interest, which must be made in writing, registered with the Treasury through model 600 and return the money, so that the Treasury does not consider it a donation.

Municipal Capital Gain: Tax on the Increase in the Value of Land in Urban Nature (IIVTNU)

The municipal capital gain taxes what the home has appreciated from the moment of purchase until its sale, donation or inheritance. When the home is inherited, this tax corresponds to the heir.

The capital gain is calculated from the cadastral value of the home, on which revaluation rates set by the municipalities are applied, taking into account the time elapsed from when the property is acquired until it is transmitted. The tax rate established by the city council to obtain the capital gain is applied to that amount.

If I give up the inheritance, do I have to pay inheritance tax?

The waiver of the inheritance has to be formalized in a public document To be express and, although it can be done at any time, it has retroactive effects from the date of death of the person who is inherited. As no goods are received, you do not have to pay the Inheritance Tax and Donations or the municipal capital gain.

Steps to follow to receive the inheritance

The heir has to carry out some procedures to receive the inheritance that they differ if there is a will or not. First, you must request the death certificate in the Civil Registry and the last wills. The next step is to go to the notary to request a copy of the will; If the deceased did not make a will, then the declaration of heirs must be made in the notary’s office or in the court of first instance.

The following procedures are the inventory of the assets and the award of the inheritance to each heir. Once these procedures have been carried out, the inheritance tax is paid; must be paid within six months of death.

It is important to note that the inheritance tax must be paid before receiving the inheritance, so you cannot have those funds to pay the tax. However, the Treasury allows you to make a self-assessment of financial and stock assets, as well as cash, as long as you justify that you need the money to pay the tax.

Finally, it should be noted that, to determine the inheritance tax, you can deduct expenses from the estate corresponding to the burial and funeral of the deceased, as well as the debts.

Finance, Tax

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