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.

ALLOWANCES

Descendants (and adopted), including those under the age of 21, ascendants (and adopted), and spouses benefit from an allowance of 1,000,000€ for acquisitions, including from life insurance policies.

Other relatives, siblings, nephews, nieces, aunts, uncles, step-children, step-parents, and in-laws of the same grade have an allowance of 10,000€ for acquisitions,  including from life insurance policies.

There is a further reduction after the rate has been applied, of 99% of the amount to be paid ( if any remains ) for acquisitions, including from life insurance polices, by all the above relatives. For spouses, descendants, parents and grandparents for inheritances over 1,000,000€ this reduction will be applied without considering the existing assets or wealth of the recipient.

Further points:

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 is 99% independent of the value of the house.  The period to retain possession of the house is three years.

3. 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.

4. For the gift or inheritance of individual enterprises, professional businesses or shares in a company the state reduction has been 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.

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 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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