Spanish Inheritance Tax for Non-Residents: Rates, Exemptions & Planning

Spanish inheritance tax (Impuesto sobre Sucesiones y Donaciones) works fundamentally differently from estate tax in countries like the UK or the US. In those systems, the estate pays tax before distribution. In Spain, each individual heir pays tax on what they personally receive. This means a property left equally to three children creates three separate tax events, each calculated independently based on that heir’s pre-existing wealth, their relationship to the deceased, and the value of their specific inheritance.

For property on the Costa del Sol, the key rule is: Spanish real estate is always subject to Spanish inheritance tax, regardless of the nationality or residency of the owner or the heir. A Swedish citizen who owns a €2M villa in Marbella and dies while resident in Stockholm still triggers Spanish inheritance tax for the heirs. This obligation exists alongside any inheritance tax the heirs may owe in their own country of residence. The potential for double taxation is real, though treaties and credits can mitigate it.

The tax must be filed and paid within six months of the death, using Modelo 650. A six-month extension is available if requested within the first five months, but interest accrues during the extension period. In our experience, the six-month window passes faster than families expect, especially when there are multiple heirs in different countries who need to coordinate the documentation.

The base rates for Spanish inheritance tax are progressive, starting at 7.65% on the first €7,993 of inherited value and rising through multiple brackets to 36.5% on amounts above €797,555. On top of the base rate, Spain applies multipliers based on the heir’s pre-existing wealth and their kinship group. Close relatives (Group I: children under 21; Group II: spouse, children over 21, parents, grandparents) get the lowest multiplier of 1.0. Distant relatives and unrelated heirs (Group IV) face multipliers of 2.0, effectively doubling the tax rate.

However, Andalucía offers a transformative reduction: a 99% reduction on the tax base for Group I and Group II heirs (spouse, children, parents) when the individual inheritance per heir is €1,000,000 or less. This effectively reduces the inheritance tax to near zero for a spouse or child inheriting property worth up to €1M. For a €1M property left to a spouse, the theoretical tax of approximately €82,000 is reduced by 99% to roughly €820.

Above €1M per heir, the 99% reduction no longer applies to the excess. A child inheriting a €2M property would get the 99% reduction on the first €1M and pay the full rate on the second €1M. For Group III heirs (siblings, aunts, uncles, nieces, nephews), Andalucía offers a smaller reduction, and for Group IV (unrelated individuals, including unmarried partners who are not registered parejas de hecho), there is no regional reduction at all. We strongly advise unmarried couples to register as a pareja de hecho in Andalucía, as this can change a partner’s classification from Group IV to Group II.

Before 2014, non-resident heirs of Spanish property were stuck with the state-level inheritance tax rates, which are significantly less generous than those offered by Andalucía and other regions. A non-resident child inheriting a €1M Marbella property could face a tax bill of €80,000+, while a resident child inheriting the same property paid almost nothing thanks to Andalucía’s 99% reduction. The European Court of Justice ruled this discrimination illegal in September 2014, and Spain was forced to extend regional benefits to EU/EEA residents.

Since that ruling, heirs who are resident in any EU or EEA country can apply the regional benefits of the community where the property is located. A Dutch child inheriting a Marbella apartment can now claim Andalucía’s 99% reduction on the same basis as a local resident. Spain also extended this right to non-EU nationals via subsequent legal reforms, meaning that in 2026, heirs of any nationality should be able to claim regional reductions, though the application process for non-EU heirs can involve additional documentation and is worth managing with a specialist lawyer.

We see confusion among clients who assume they are automatically entitled to the Andalucía reduction. It is not automatic. The heir must explicitly request the application of Andalucía’s rules in the Modelo 650 filing. If this is not done correctly, the state-level rates apply by default, and correcting the error after filing requires an appeal that can take 12-18 months.

Double taxation on inheritance arises when both Spain and the heir’s country of residence tax the same asset. Spain has bilateral inheritance tax treaties with a limited number of countries. The UK has no inheritance tax treaty with Spain, but HMRC allows a unilateral credit for foreign tax paid on the same asset, effectively preventing double taxation in most cases. Germany has an inheritance tax treaty with Spain (signed 1966) that allocates primary taxing rights on real estate to the country where the property is located, with Germany providing a credit for Spanish tax paid.

Sweden abolished its inheritance tax entirely in 2005, so Swedish heirs inheriting Spanish property only face the Spanish liability with no risk of double taxation. The Netherlands is the most problematic case for our clients. There is no inheritance tax treaty between Spain and the Netherlands, and Dutch inheritance tax applies to the worldwide estate of a Dutch-resident deceased. Dutch heirs may need to pay both Spanish and Dutch inheritance tax on the same property, though the Netherlands does allow a proportional credit for Spanish tax paid under its unilateral relief provisions.

For non-EU nationals, the situation depends entirely on their country of residence. US citizens face potential triple exposure: Spanish inheritance tax on the property, US federal estate tax, and potentially state-level inheritance or estate tax. US-Spain has an estate tax treaty (1990) that allocates real property to Spain, with the US providing credits. We always recommend clients from treaty countries confirm the current treaty provisions with advisors in both jurisdictions, because treaty interpretation can vary between tax authorities.

The simplest planning tool is joint ownership between spouses (pro indiviso, typically 50/50). When one spouse dies, only their 50% share passes to the heirs and triggers inheritance tax. The surviving spouse retains full ownership of their 50%. If the deceased spouse’s 50% of a €2M property passes to the surviving spouse, the taxable amount is €1M, which falls within Andalucía’s 99% reduction threshold for Group II heirs.

A more sophisticated structure is the usufructo (usufruct). Under Spanish law, a deceased person’s estate is typically divided into three thirds: the legítima estricta (one-third that must go to children equally), the mejora (one-third that can be distributed among children unequally), and the libre disposición (one-third that can go to anyone). However, non-Spanish nationals can opt to have their national law apply to succession under EU Regulation 650/2012. A British citizen can specify in their will that English law applies, which has no forced heirship rules, giving complete freedom of testamentary disposition.

The usufructo vitalicio (lifetime usufruct) allows the surviving spouse to retain the right to use and enjoy the property for life while bare ownership passes to the children. This splits the taxable value: the usufruct is valued using a formula based on the usufructuary’s age (89 minus age = percentage), and the bare ownership is the remainder. For a 65-year-old surviving spouse, the usufruct is valued at 24% and bare ownership at 76%. This can keep both portions under the €1M threshold for the 99% reduction.

Every foreign national who owns property in Spain should have a Spanish will (testamento) in addition to their home-country will. The Spanish will should cover only your Spanish assets. Your home-country will should explicitly exclude Spanish assets to avoid conflicting provisions. This is not legally required, but the practical benefits are enormous: a Spanish will is held at a Spanish notary, registered with the Central Registry of Last Wills (Registro General de Actos de Última Voluntad), and can be accessed within days of death by your heirs’ lawyer.

Without a Spanish will, your heirs must obtain your home-country will, have it apostilled, officially translated into Spanish by a sworn translator (traductor jurado), and then present it to a Spanish notary. This process typically takes 3-6 months and costs €3,000-8,000 in translation, apostille, and legal fees. During that time, the property cannot be sold, rented, or legally transferred. We have seen cases where heirs needed to pay inheritance tax within the six-month deadline but could not complete the documentation in time, resulting in late filing penalties.

A Spanish will costs approximately €150-300 at a notary and takes about 30 minutes to execute. It should specify which jurisdiction’s law governs succession (under EU Regulation 650/2012), name the heirs, and ideally include substitute heirs in case a primary heir predeceases the testator. We advise every client to execute a Spanish will at the same notary appointment where they sign the purchase deed (escritura de compraventa). It is the single highest-value low-cost step in inheritance planning.

First, the death certificate must be obtained and, if issued outside Spain, apostilled and translated by a sworn translator. Second, the heirs’ lawyer requests a certificate from the Central Registry of Last Wills (Registro General de Actos de Última Voluntad) to confirm whether the deceased had a Spanish will and where it is held. This certificate can only be requested 15 days after the date of death. Third, if a Spanish will exists, the notary who holds it provides an authorised copy to the heirs’ lawyer.

Fourth, the heirs must obtain an NIE number (fiscal identification) if they do not already have one. Fifth, the inheritance tax (Modelo 650) is calculated and filed with the Andalucía tax authority (Agencia Tributaria de Andalucía) within six months of the death. Payment is due at the time of filing. Sixth, the deed of inheritance acceptance (escritura de aceptación de herencia) is signed at a notary by all heirs, formally accepting and distributing the estate according to the will or intestacy rules. Seventh, the new ownership is registered at the Land Registry (Registro de la Propiedad) and the Cadastre updated.

The entire process, when properly managed with a Spanish will in place, typically takes 3-4 months. Without a Spanish will, it can stretch to 12-18 months. Costs include inheritance tax (potentially near zero with Andalucía’s 99% reduction), plus­valía municipal tax on the land value increase since the deceased acquired the property, notary fees (€300-1,000), Land Registry fees (€200-600), and legal fees (€2,000-5,000 depending on complexity).