As of today, 2nd of August 2016, those that inherit either a ´vivienda´ or a ´finca agricula´ will be entitled to substantial deductions to the Inheritance Tax due, as published in the official Andalucian Bulletin BOJA on August 1st. In the following circumstances.
- In the case of vivienda (in this case habitual home). This reduction shall apply with the following requirements:a) that the beneficiaries are the spouse, parents or children of the deceased, or relative over sixty-five who had lived with the same during the two years preceding the death, you are entitled to a deduction varying between 100% for a property with a real value up to 123.000 euros to 95% for a property with a real value over 242.000 euros. To make use of the fiscal deduction you need to hold on to the property for at least 3 years (exception if the heir dies before the end of that period), after that you may sell if you wish.
- In the case of ´finca agricola´ there will be an automatic 99% reduction of the inheritance tax due if you inherit the finca from a direct ascendant or spouse and the finca was worked by him/her, or, in case he/she was a pensioner or had an accredited permanent disability, by his/her spouse, descendants or another person employed by him/her. To qualify you need to be an agricultural worker yourself and maintain the finca in working order for at least 5 years (exception if the heir dies before the end of that period), to avoid having to pay back the tax reduction. In case you inherit a ´finca agricola´ but you are not related to the deceased, there is an additional series of requisites to be met, to be able to qualify for the mentioned reduction of inheritance tax.
As per the 1st of January 2017 a spouse or direct descendant/ascendant can receive 250.000€ before any succession tax is payable. In addition to this if the amount inherited is above the 250.000€ IHT has to be payed, but with a reduction of 200.000 if the property´s value is betweeen 250.000 and 350.000 euros. Your own personal net worth cannot exceed €402.678,11.
For IHT, residents and non-residents (from the EU) are to be treated equally, so the same allowances should apply, as per EU regulations. Of course, if the UK leaves the EU, and does not join the EEA then the non-resident reductions will revert to the state. It is very clear that the reductions apply to citizens of an EU/EEA member state. It is possible that the UK and Spain may negotiate a variation and if they do, we will report about it, of course.
Update re the EU citizen requirement through ruling Spanish Supreme Court early 2018.
Important Update* From January 1 2018 the allowance in Andalucia has increased to 1 million euros. Those who meet the EU criteria, will be exempt of the taxes unless assets are over this amount.
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.
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