Andalucía has its own inheritance tax regulations as a result of the Spanish State ceding the tax revenue of inheritance and gift tax to Comunidades Autónomas, along with some regulatory autonomy to adapt tax to the particular circumstances of the respective Comunidad Autónoma.

This means that most Comunidades Autónomas have ruled new (and huge) benefits compared to those established by the Spanish State.

While the tax scheme and regime is the same in all parts of Spain, the Comunidades Autónomas took advantage of the given power to fix higher thresholds, or different rates or direct reductions on the amount to be paid (and sometimes all of these) to benefit close relatives of the deceased or disabled people. There are also benefits that help promote local business, farming, etc. as well as in the acquisition of the Comunidad Autónomas’ cultural assets.

However, the Comunidades Autónomas change their regulations quite frequently so it is necessary to check the regulation in force at the time the tax is due (the day of death).

Andalucía is a good example of the above and the regulation has constantly increased the benefits for descendants, ascendants and spouse of the deceased, and also disabled people.

So, in 2015 there was a reduction of 175.00 € for these close relatives (250.000 for disabled people), improved to 250.000 if the acquisition was under the amount ( 200.000 if the acquisition was under 350.000) limited to beneficiaries whose existing wealth was under 402.678,11

MODIFICATIONS FROM 1ST JANUARY 2022

The tax rates will remain the same with regard to the kinship groups ( from the 11 of April of 2019, there is a reduction of 99% of the amount to be paid ( if any remains ) for acquisitions by ascendants, descendants, widow or widower) without taking into account the existing assets or wealth of the tax payer thus simplifying the process. The combination of the tariff and coefficient will in general, lead to marginal tax rates of no more than 45%.

Likewise, certain reliefs are improved:

1. Registered unmarried partners in Andalucía and those registered in other Autonomous Communities will be considered the same as spouses for all reductions, tax rates and deductions.

2. For the inheritance of the house that was the habitual residence the State reduction on the taxable amount changes from between 95-100% of the value of the house, to a fixed reduction of 99% independent of the value of the house.  The period to retain possession of the house is three years.

3. The State reduction on the taxable amount for spouses, descendants, parents and grandparents for inheritances from 1,000,000€ will be applied without considering the existing assets or wealth of the recipient.

4. The amount of the State reduction for siblings, nephews, nieces, uncles and aunts is increased from 7,993.46 to 10,000€.

5. For taxpayers with disabilities the State reduction on inheritances is 250,000€ for those with a disability of 33% up to 65%, and 500,000€ for those with a disability of 65% or more. The reduction is applicable no matter what family relationship there is between the deceased and the taxpayer, and disregarding their existing assets or wealth. Moreover, it is compatible with the above reductions for kinship so for those direct relations mentioned in 3. the combined reduction will amount to between 1,250,000€ and 1,500,000€ instead of the previous 1,000,000€ depending on the grade of disability. For taxpayers mentioned in 4. the reduction will now be up to 260,000€ or 510,000€ instead of 10,000€ according to the grade of disability.

6. For the gift or inheritance of individual enterprises, professional businesses or shares in a company the state reduction is improved as follows:

a) The kinship group is widened to allow uncles, aunts, nephews and nieces to benefit from the reduction for shareholdings.
b) The obligation that it is the main source of income is eliminated.
c) The reduction now allows the assignment of capital to third parties, obtained through profits not distributed within the 10 previous years, as long as the profits are generated from economic activity.
d) The acquisition or the maintenance of the acquired assets are not required to be exempt from wealth tax. However, the tax payer must retain the actual assets acquired and not merely their monetary value. The period to retain the assets is reduced to three years irrespective of the family relationship between donor and recipient.
e) For gift or inheritance of individual enterprises or professional businesses the benefit is extended to retired or disabled people.
f) Agricultural businesses are also included in this legislation.

7. For reductions for cash gifts to descendants for the acquisition of a habitual residence, the requirement that it be for a first residence is dropped, the benefit is extended to victims of domestic violence and of terrorism. The maximum amount of reduction is increased from the general limit of 120,000€ to 150,000€ and from 180,000€ to 250,000€ for disabled recipients.

8. For reductions for the gift of the habitual residence to descendants the benefit is extended to descendants under 35, victims of domestic violence and of terrorism, with a maximum general limit of 150,000€ and an increase from 180,000€ to 250,000€ for disabled recipients.

9. For reductions for cash gifts to family members to start up or expand an individual enterprise or professional business the requirement to keep the business for a given period is improved to no longer take account of the family relationship.

All of these reductions are already in the calculator.

In some cases, the local regulation does not give a benefit but an increase, as happens in Andalucía, which rules a slight increase in the tax to be paid for large acquisitions by non-related beneficiaries.

• The question now is who can take advantage of these benefits:
• If the deceased was a resident in Spain, the inheritance tax law of Andalucía is applicable if the deceased lived there for most of the five years immediately prior to death.
  If the deceased had lived longer in another Comunidad Autónoma than that in which they had their last residence, within this last five year period, that Comunidad Autónoma’s rule will be applied.

  If the deceased was a resident in Spain, but for less than five years at the time of death, no Comunidades Autonomas Law will be applicable, BUT Spanish State Law will be applied.

• If the deceased was a non-resident in Spain, BUT the beneficiary is, the tax payer can choose to apply the rule of the Comunidad Autónoma where the most valuable assets are located and, if there are no assets in Spain, the Law of the Comunidad Autónoma where they live.
• In cases where both the beneficiary and the deceased were non-residents, the tax payer can choose the law of the Comunidad Autónoma where the most valuable assets are located.These options for non-residents, are the result of a long process that has evolved in Spanish Law since the European Court of Justice resolution of September 2014.

  VERY IMPORTANTLY this development has led to the right to claim a tax refund whether the beneficiary and/or the deceased were residents in a EU Member State or not.

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