With an increasing number of foreign nationals moving to Spain, it is becoming more common to inherit or receive gifts of assets located abroad. If this applies to you, it is essential to understand where these transactions are taxed to ensure compliance with your tax obligations.
Who pays tax and to whom?
Unlike in other countries, where an estate handles all assets of the inheritance and manages related tax payments before any distributions are made, individuals who are tax residents in Spain—regardless of their nationality—are required to pay Inheritance and Gift Tax (ISD) individually. This applies to any assets or shares of assets they inherit or receive as gifts, including those located abroad. The tax applies to all types of assets, such as real estate, bank accounts, and shares in foreign companies, etc.
The applicable regulations and the tax authority responsible for collecting the tax of each heir will depend on the type of transfer, the nature of the assets, and whether the donor or deceased was a tax resident of Spain.
Gifts
If a tax resident in Spain receives a gift of assets located abroad the ISD is payable to the Autonomous Community where the recipient resides, and the regulations of that region will apply.
Exception If the gift involves real estate located abroad, the tax is payable to the Spanish State, and the recipient can choose to apply either state regulations (which are generally less favourable) or the rules of their Autonomous Community (which often offer greater incentives and lower tax rates)
Inheritances
If a tax resident in Spain inherits assets located abroad, the taxation rules depend on the tax residence of the deceased.
If the deceased was a tax resident of Spain, the regulations of the Autonomous Community where he resides will apply
If the deceased was a non-tax resident of Spain, the heir can choose between applying state regulations or the rules of the Autonomous Community where he resides.
See the following summary table:
| Type of Acquisition | Tax Authority | Applicable Regulations |
|---|---|---|
| Donation of real estate | State Tax Authority | Choice between state or regional rules |
| Donation of other assets | Autonomous Community of donee | Rules of donee’s Autonomous Community |
| Inheritance from a resident | Autonomous Community of deceased | Rules of deceased’s Autonomous Community |
| Inheritance from a non-resident | State Tax Authority | Choice between state or regional rules |
What about the foreign tax due?
While these general rules apply, it is important to check whether Spain has signed a double taxation treaty regarding ISD with the country where the assets are located. These treaties may contain specific provisions, so you must follow the rules outlined in the applicable treaty.
Example
A UK tax resident passes away and leaves an inheritance to his son, who lives in Marbella (Andalusia). The inheritance includes:
- A house in London valued at €500,000
- €150,000 in a private pension in the UK
- €20,000 in a bank account in Marbella
In this case, the heir must pay ISD to the Spanish state for the total inheritance value (€670,000). Threfore, the heir can apply either state ISD regulations or the Andalucia ones, where he lives.
If you would like to understand other aspects of the inheritance process in Spain, please have a look at our guide From Signing a Will to inheriting in Spain.
