Inheritance Tax in Spain: A Guide for Foreign Property Owners

Buying a property in Spain is a decision most foreign owners plan carefully. What far fewer plan with the same attention is what happens to that property when they die — and that gap can cost their heirs time, money and legal complications that could have been avoided entirely.

Inheritance tax in Spain is one of the most complex fiscal aspects for non-resident property owners. The amount payable depends on the region where the property is located, the heir’s relationship to the deceased, and whether the heir is a Spanish tax resident. Without prior planning, the differences can be substantial.

In this guide from Sol-4 Gestión, we explain how inheritance is taxed in Spain for non-residents, what documents are required, what the legal deadlines are, and how to legally reduce the tax burden before it’s too late to act.

What Is Spanish Inheritance Tax and Who Does It Affect?

The Impuesto sobre Sucesiones y Donaciones (Inheritance and Gift Tax) is the tax levied on the transfer of assets and rights upon death. In practice, it taxes the increase in wealth that heirs receive as a result of an inheritance.

In Spain, this tax is governed by Ley 29/1987, but the autonomous communities (regions) have broad powers to modify rates, reduce the tax base or grant tax credits (bonificaciones). This has created significant differences between territories: inheriting in Madrid or Andalusia can mean a radically different tax bill than doing so in other regions.

For the non-resident foreign property owner, there is an additional layer of complexity: even without living in Spain, their heirs are required to settle the tax with the Spanish Tax Agency (Agencia Tributaria) if the inherited estate includes assets located in Spanish territory.

Resident vs. Non-Resident: How It Affects the Tax

The distinction between unlimited tax liability (obligación personal) and limited tax liability (obligación real) is the first concept to understand.

Unlimited liability (Spanish tax residents)

Heirs who are tax resident in Spain pay inheritance tax on all the assets and rights they receive, wherever those assets are located (article 6 of Ley 29/1987). If the deceased was resident in Spain, the rules of the autonomous community where the deceased lived apply, meaning the region where they spent the most days in the five years before death. If the deceased was not resident in Spain, the rules of the region where the highest-value Spanish assets are located apply.

Limited liability (non-residents)

Heirs who are not tax resident in Spain pay tax only on assets and rights located, exercisable or to be performed in Spain, and on life insurance policies taken out with Spanish insurers or entered into in Spain with foreign insurers operating there (article 7 of Ley 29/1987). Following the judgment of the Court of Justice of the EU of 3 September 2014 (case C-127/12) and subsequent Spanish Supreme Court case law, non-resident heirs are entitled to apply regional rules instead of the national ones. If the deceased lived in an autonomous community, that region’s rules apply. If the deceased was not resident in Spain, the rules of the region where the highest-value Spanish assets are located apply (second additional provision of Ley 29/1987). This removes the historical discrimination between residents and non-residents and opens the door to the most favourable regional reductions and tax credits.

Heirs who are not resident in another EU member state, or in an EEA state with mutual tax assistance arrangements, must appoint a person resident in Spain to represent them before the Spanish tax authorities, and must do so before the filing deadline ends (article 18.4 of the Inheritance Tax Regulations). This is usually the case for heirs living in the UK.

Tax Groups and Rates

Spanish inheritance tax does not apply the same rate to all heirs. The amount depends on two factors: the tax base (the value of what is inherited) and the relationship group the heir belongs to.

The national tax scale is progressive, from 7.65% up to 34%, which applies to the portion of the net taxable base above €797,555.08 (article 21 of Ley 29/1987). The resulting amount is then multiplied by a coefficient based on the kinship group and the heir’s pre-existing wealth (article 22): 1.0 to 1.2 for Groups I and II, 1.5882 to 1.9059 for Group III and 2.0 to 2.4 for Group IV. Autonomous communities can approve their own scale, coefficients, reductions and tax credits.

Regional Differences: Why the Property’s Location Matters

One of the most important factors for foreign property owners is that the tax cost of inheriting in Spain varies enormously by autonomous community. Some regions have approved 99% tax credits (bonificaciones) for Group I and II heirs, effectively reducing the tax to almost nothing. Others apply the national scale with minimal changes.

The Valencian Community, where many of Sol-4 Gestión’s clients own property, has its own framework. For deaths on or after 28 May 2023, Group I and II heirs (descendants, spouse and ascendants) receive a 99% tax credit on the portion of the tax that relates to the assets and rights declared. The same credit applies to heirs with a physical or sensory disability of 65% or more, or a mental disability of 33% or more (article 12 bis of Valencian Law 13/1997, as amended by Law 6/2023 of 22 November). Non-resident heirs can also claim it when the Valencian rules apply. Siblings, nephews and nieces, stepchildren who have not been adopted and unrelated beneficiaries do not qualify, so prior planning is especially important for them. Because the credit only covers declared assets, the return must include the entire inherited estate.

Specialist advice before a death occurs makes it possible to structure the estate and the will in a way that maximises the available reductions for heirs.

How the Tax Base Is Calculated for Non-Residents

For non-resident heirs, the tax base is calculated only on assets located in Spain. The main assets included are:

• Property: any real estate in Spanish territory. Properties must be declared at least at their Cadastral reference value (valor de referencia) at the date of death; if the value you declare is higher, that value is used. Only if the property has no reference value is the higher of the declared value and the market value used (article 9.3 of Ley 29/1987).
• Bank account balances held in Spanish financial institutions, at the date of death.
• Listed securities: at their market price on the day of death.
• Rights in rem over real estate located in Spain.

The tax base is the net value inherited: deductible charges, debts and certain expenses are subtracted from the value of the assets (articles 9, 12, 13 and 14 of Ley 29/1987). Deductible items include the deceased’s documented debts, the deceased’s outstanding taxes paid by the heirs, and the costs of the last illness, burial and funeral. Debts owed to the heirs themselves or their relatives are not deductible. The Tax Agency can review declared values, so accurate valuation from the outset is important.

The Deadline: Six Months from the Date of Death

This is the figure that catches most foreign heirs off guard — and the one that causes the most problems when it isn’t known in advance.

The inheritance tax self-assessment must be filed within six months from the date of death (article 67 of the Inheritance Tax Regulations). Non-resident heirs file Modelo 650 with the Spanish State Tax Agency (National Tax Management Office). Heirs resident in Spain whose relative lived in the Valencian Community file it with the Valencian Tax Agency (Agència Tributària Valenciana).

If six months proves insufficient to gather documentation or manage procedures from abroad, a further six-month extension can be requested, but only within the first five months of the original period. If the tax authority does not reply within one month, the extension is deemed granted. The extension is not free: late-payment interest accrues from the end of the original six months until the return is filed (article 68 of the Inheritance Tax Regulations). If the return is filed late without an extension, and before any request from the tax authority, a surcharge applies: 1% plus a further 1% for each full month of delay, rising to 15% plus late-payment interest after twelve months (article 27 of the General Tax Law). If the tax authority itself detects the failure to file, a penalty may also be imposed.

Six months can sound like enough time. In practice, when foreign documents need apostilling, wills need certified translation, fiscal representatives need appointing and assets need valuing, the time runs out faster than expected.

Documentation Required to Manage an Inheritance in Spain

The Tax Agency requires the following mandatory documentation for the Modelo 650:

• Deed of acceptance of inheritance (original and simple copy) or, failing that, an inventory of assets and heirs in duplicate.
• Copy of the death certificate.
• Copy of the Certificate from the General Registry of Last Wills (Registro de Actos de Última Voluntad), even if it comes back negative.
• Copy of the will or declaration of heirs.
• Copy of the passport, ID or NIE of the heirs and of the fiscal representative in Spain.

Depending on the assets included in the estate:

• Copy of the property tax receipt (IBI) and title deed, or nota simple from the Land Registry.
• Bank certificate showing account balances at the date of death.
• Insurance contracts or insurer’s certificate, if applicable.

Important: documents issued by foreign authorities must be translated into Spanish by a sworn translator and, as a general rule, bear the Hague Apostille. Public documents from other EU member states, such as death certificates, are exempt from the apostille; UK documents still need one.

How to Legally Reduce Inheritance Tax in Spain

There are legal mechanisms that can significantly reduce the tax burden on a Spanish inheritance. The main ones are:

A Spanish will

Having a will drawn up before a Spanish notary is the simplest and most effective step. It allows clear designation of heirs and avoids intestacy. In addition, under EU Regulation 650/2012 anyone can choose in their will that their estate be governed by the law of their nationality, whether or not they are an EU citizen, so British nationals can too (article 22). Without that choice, the estate is governed by the law of the country of habitual residence at the time of death (article 21). If the deceased lived in Spain, Spanish law applies, including forced heirship. If they lived abroad, that country’s law applies, although some foreign laws, such as English law, refer the succession to real estate back to the law of the place where it is located, so the Spanish property may still end up governed by Spanish law (article 34).

Applying the correct regional rules

Non-residents cannot freely choose a region. The law determines which one applies: the region where the deceased lived or, if the deceased was not resident in Spain, the region where the highest-value Spanish assets are located. The heir is entitled to apply those regional rules instead of the national ones (second additional provision of Ley 29/1987). Checking which rules apply and claiming their reductions and tax credits correctly can produce meaningful savings; a specialist adviser can calculate this in each case.

Main residence reduction

If the deceased’s main residence was in Spain, a 95% reduction on its value may be claimed by the spouse, descendants, ascendants, or a relative over 65 who lived with the deceased for the previous two years. Under the national rules, the cap is €122,606.47 per heir and the property must be kept for ten years (article 20.2.c of Ley 29/1987). Most regions, including the Valencian Community, have their own version with different caps and holding periods. Important: a holiday home owned by someone living outside Spain is not their main residence, so this reduction does not normally apply in that case.

Prior succession planning

The most effective way to reduce inheritance tax is to act before the death occurs: structuring the estate correctly, valuing assets accurately, designating heirs with fiscal criteria in mind, and drafting a will that maximises available reductions. Once a succession is open, the room for manoeuvre diminishes considerably.

Manage Your Inheritance in Spain with Sol-4 Gestión

If you have inherited a property in Spain, or want to plan the transfer of your estate to protect your heirs, Sol-4 Gestión can help.

Through our inheritance services in Spain, we manage the entire process: from obtaining the NIE and opening accounts, to valuing the estate, filing the Modelo 650 with the Tax Agency, drafting the deed of inheritance acceptance and updating the Land Registry. We also act as fiscal representatives in Spain for non-resident heirs.

We work in English and Spanish, and can also assist you in German.

Tell us about your case.

Frequently Asked Questions About Inheritance Tax for Foreign Property Owners