Inheritance Tax in Spain (ISD): What You Need to Know
Inheritance Tax in Spain, known as Impuesto sobre Sucesiones y Donaciones (ISD), is one of the most important (and often misunderstood) aspects of inheriting Spanish assets. Laura Albors has created a practical, step-by-step overview of how Spanish Inheritance Tax works, who pay it, and what factors make the biggest difference to the final amount due.
What Is Inheritance Tax in Spain?
ISD is the tax payable when you inherit assets located in Spain. This includes property, bank accounts, investments and other Spanish-based assets.
The amount of tax payable depends on three key factors:
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The region of Spain whose rules apply
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Your relationship to the deceased
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The value of the assets you inherit
Each of these elements can significantly affect the final tax bill.
Do You Pay Spanish Inheritance Tax If You Live Abroad?
Yes. Anyone who inherits assets located in Spain is subject to Spanish Inheritance Tax, regardless of where they live.
Being non-resident does not exempt you from ISD. Spanish tax law applies to the assets, not the heir’s country of residence.
Which Spanish Region’s Rules Apply?
Inheritance Tax in Spain is largely governed at a regional level. Each Autonomous Community sets its own reductions, allowances, and bonuses, which apply regardless of nationality or residency.
To determine which regional rules apply, you must first establish whether the deceased was a Spanish resident:
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If the deceased was resident in Spain:
The rules of the region where they were resident apply. -
If the deceased was not resident in Spain:
The rules of the region where the highest value of Spanish assets is located apply.
This is a crucial step, as the difference between regions can be substantial. Always check the specific regional regulations that apply to your case.
Inheritance Tax Groups in Spain: Why They Matter
Spanish Inheritance Tax is structured around beneficiary groups. Your group determines the allowances and reductions you can claim.
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Group 1: Children under 21
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Group 2: Children aged 21 or over, spouses, registered partners, and parents
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Group 3: Siblings, uncles, aunts, nieces, and nephews
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Group 4: All other beneficiaries
In most Spanish regions:
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Groups 1 and 2 benefit from generous tax-free allowances and, in many cases, reductions of up to 99% of the final tax payable.
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Group 3 beneficiaries usually only benefit from the smaller national allowances.
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Group 4 beneficiaries do not receive any tax relief.
Your family relationship can dramatically change the outcome of the tax calculation.
Is the Family Home Fully Taxed?
Not always.
Spain allows a reduction of up to 95% of the value of the main residence for close relatives in Groups 1 and 2 (spouses, children, parents, and other direct-line relatives).
In some regions, certain Group 3 relatives may also qualify if they are over 65 and had been living with the deceased.
To apply this reduction, several conditions must be met:
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The property must have been the deceased’s main residence
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The beneficiary must retain their share for a minimum period (usually five years), unless an exception applies
When applicable, this reduction can significantly reduce — or almost eliminate — the inheritance tax due on the property.
How Long Do You Have to File Inheritance Tax?
The inheritance tax must be filed within six months from the date of death.
You can request a six-month extension, but this must be done within the first five months.
Importantly, ISD must be paid before heirs can take ownership of the inherited assets. Delaying the process often leads to unnecessary complications, so it is best not to leave it until the last minute.
How Do You Pay Inheritance Tax in Spain?
Inheritance Tax is submitted using Forms 650 and 660:
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Form 660 details the full inventory and valuation of the estate and is usually prepared first.
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Form 650 is the inheritance tax return itself.
Some regions require both forms separately, while others combine them into a single filing.
Once completed, the tax can often be paid directly from the deceased’s Spanish bank account, provided there are sufficient funds. Banks are allowed to release money specifically to pay ISD, even if the account is otherwise blocked, avoiding the need for heirs to use personal funds upfront.
Do You Pay Inheritance Tax Twice If More Than One Country Is Involved?
Not necessarily.
Spain does not have double-taxation treaties specifically for inheritance tax, but it does allow a credit for tax paid abroad on the same assets.
Likewise, many other countries provide relief or credits to avoid taxing the same inheritance twice. Proper cross-border legal and tax advice is essential to avoid unnecessary double taxation.
What Happens If You Don’t File Inheritance Tax?
Failing to file ISD can result in:
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Penalties and interest
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Inability to register inherited property in your name
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Banks refusing to release inherited funds
Filing on time is always the safest and most cost-effective option.
Whether you are planning a will or dealing with an inheritance, early and proper advice is essential to reduce tax exposure and avoid costly delays.
If you would like help with a specific inheritance matter, the team at My Lawyer in Spain will be happy to assist you. Contact our specialist Inheritance and Tax planning team.
