Four Year Statute of Limitations on Inheritance taxes

There is no legal requirement to accept your inheritance within six months. There is though an obligations to pay the taxes on the succession in a six months time period unless an extension has been applied for in writing.

Article 66 in the law on taxes (Law 58/2003 of 17 December) states that the statute of limitation is four years. The time period will commence on the day following the period of voluntary payment. After that date the tax agency cannot collect the debt.

So one could consider waiting out this period as advised by many including some lawyers. What are the chances of being found out and the consequences?

Firstly you cannot move any of the inheritance in this period. You will not be able to put the assets in the name of the benefactors such as the escritura, you will not legally have the right to the deceased assets including funds in the bank. You will not be able to sell a property or move any assets. Some consider this as an option if they have no intention of selling a property on which the deceased also has title.

So what can possibly go wrong?

It has been common in the past years to leave the acceptance of the inheritance for this period but, with the modernisation of Spanish bureaucratic technology, the various governmental and tax bodies are finding it easier to share information. There is now the option of any of the following to share the information to third parties. You should know that it is the duty of certain regulatory bodies to contact hacienda. The main ones listed below:

The registry civil managers forward on a monthly basis, the figures of those deceased in their municipality.

Notaries are obliged to submit in the first two weeks period of each trimonthly period all documents in relations to acts or contracts which should result in the payment of succession tax, capital gains tax or other.

Judicial bodies, financial entities (banks included), foundations, associations, debt collectors, companies, officials, individuals or any other public or private entities not in agreement on the right of persons to title of assets other than the title owner without taxes or debts being paid.

There are consequences for not declaring or late filing. This includes fines as well as surcharges. Sanctions will be put in place depending on when you declare or when you receive notification of nonpayment. Estimate a sanction of 5% of taxes not paid within three months after the voluntary period. Six months 10%. After a 12 month period the sanction will rise to a staggering 20% for the time elapsed after the first twelve month period.

Those who cannot meet the requirements to pay the taxes within the six months period, can ask for a postponement and to pay the taxes in instalments (interest payable).

Plusvalia. unfair as it appears, there is also the plusvalia (town hall tax) to pay. This can also be structured to payments that you can meet as long as you apply before the six months voluntary period has expired. It is also important to know that some town hall give reductions on the plusvalia tax and some not charging this tax at all.

Taken from one of our corporate partners at: https://www.conveyancingspain.com/blog/living-in-spain/article/four-year-statute-of-limitations-on-inheritance-taxes

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.