A recent uptick in inheritances has put new attention on an upcoming change in Spanish inheritance laws. Starting in 2022, the Inheritance Gift tax will be Levied in a more standardized and less subjective way. This change has prompted some to consider getting inherited property transferred sooner rather than later.
Due to the tragedy of excess deaths from the COVID-19 pandemic, Spain has seen in uptick in properties being transferred via inheritance. This uptick has been most pronounced in Catalonia, with Andalusia not far behind. Madrid and Valencia have also seen significant increases.
Executing an inheritance can already be a cumbersome process. Typically, the services of both a notary and attorney are required. This process can take months or even years depending on the circumstance. Factors such as the existence of a will and disputes between different recipients of an inheritance will determine how long the process takes.
Claiming an inheritance also comes with expenses. The first tax that come to mind for most is the Inheritance Tax. This will vary from region to region but occupies a range from 7.6%-34%. The local government will take its own share. If the property has increased in value since the last transfer, the municipal government will take a portion of the increase in value. This will range from 50%-150% depending on the municipality. These taxes are on top of the other expenses that are associated with buying property such as insurance, real estate taxes, and community fees.
Only the first of these taxes will be changing in 2022. Pursuant to Law 11/2021, which implements EU agreements against tax fraud, the value of inherited property will be assessed differently. Now, instead of an independent assessment at the time of the inheritance, the evaluation for tax purposes will be based on existing Cadastral valuations. This may be advantageous for those who wish to make improvements to an inherited property before selling it.
Prior to the reforms, an official from the local government would often have to come and perform a visual inspection and evaluation. This will no longer be necessary, but municipalities will need to find ways to update the cadastral values. If they are unable to do so in time, the new law proscribes “the taxable base, without prejudice to the administrative verification, will be the greater of the following magnitudes: the value declared by the interested parties or the market value.”
Because of potential lack of action from local governments, those receiving an inheritance may want to complete the process to avoid any ambiguity.