Author: Christopher Pickering.
New inheritance tax (IHT) rules, which have been implemented in the region of Andalucia in January of 2017, now mean that many people will no longer face a potentially hefty tax bill. The new rules apply specifically to those beneficiaries whose relationship to the deceased falls within either kinship group 1 (direct descendants under 21 years of age) or kinship group 2 (direct descendants over 21 years of age, spouses and ascendants).
For beneficiaries that fall within either of those 2 kinship groups they now have a complete exemption on inheritance tax so long as the following 2 points are met:-
If the value of the inheritance exceeds €250,000 but is less than €350,000 then IHT will apply but the beneficiaries will now have an exemption on the first €200,000 of inheritance (assuming of course that their pre-existing net wealth is under €402,678.11. Example:-
Bill lives in Marbella, has a total wealth of €400,000 and he inherits €290,000 from his deceased father. Important points to note:-
Bill’s taxable base is €290,000 minus the allowance of €200,000 means that Bill can expect to pay tax at the applicable rates on the remaining €90,000.
For beneficiaries that either have a pre-existing net wealth of more than €402,678.11 or receive an inheritance greater than €350,000 then neither of these new exemptions outlined above would apply.
Additionally, there is a new set of exemptions applicable to the main residence when it is inherited by either the spouse, direct descendents or a relative aged 65 or more. The exemptions basically dictate how much of the property value is added to the taxable base for the inheritance tax calculation. The exemptions work as follows:-
Two important points to note with regards to this set of exemptions is that the beneficiary must have been living in the residence for the 2 years prior to the owner’s death and the property being inherited must not be sold within the first 3 years of being inherited.
If you are concerned about IHT or would like any further information then please feel free to contact me. Chris Pickering – International Financial Adviser at: