Valencia

Inheritance tax in Comunidad Valenciana

Valencia 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.

The question now is who can take advantage of these benefits:

If the deceased was a resident in Spain, the inheritance tax law of Valencia 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.

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).

In Valencia there are bigger benefits than those ruled by the state law for ascendants, descendants and spouses with a threshold of 100.000 € as well as a deduction of the total tax amount to be paid of up to 75% for children under 21 and up to 50% for all other children, ascendants or spouses. The deduction of the tax burden may be also up to 75% for disabled people, even if they are unrelated ( for successions opened before 6/8/2013 the deduction is up to 99%)

From the same date, it is specifically ruled that non-married couples constituted according to the Comunidad Valenciana`s law of Uniones de Hecho Formalizadas de la Comunidad Valenciana” and inscribed in its own Registry have the same rights as married couples.

In Valencia there are peculiarities related to the reduction of value of the house which has been the habitual residence of the deceased and in the acquisition of an individual enterprise, professional business or share in a company.

In the acquisition of an individual enterprise, professional business or share in a company, there are some modifications for successions opened after the 1-1-2017 that consist of limiting the benefits that the special regulation of Comunidad Autónoma Valenciana establishes to small enterprises or businesses according to their turnover. (There is always the reduction available by State Law).

Preferences within the kinships in those reductions have been removed in Comunidad Valenciana´s law. Now any ascendant, descendant, spouse, non married partner or colateral till the third grade who acquires the enterprise or a share in it can benefit independently of the other inheritors.

From the 7th of March 2019 there is a new reduction of 99% of the value of rural land if it is inherited by an ascendant, descendant, spouse or kin up to the third grade, if the beneficiary is a professional farmer ( «profesional de la agricultura»)

The same reduction applies if the beneficiary ( any) sells the inherited land to a professional farmer within the year of acquisition or transfers it to the «Red de Tierras»

The Land must be kept in the property of the acquirer for the next five years.

From the first of January 2020, the reduction in the value of the individual business or share in a company increases to 99% of the value.

All these cases are accounted for in the calculator