What is Inheritance and Gift Tax?
The Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones - ISD) is a tax levied on the gratuitous transfer of assets and rights between individuals. It is a direct, progressive tax and, like the Wealth Tax, is devolved to the Autonomous Communities, making it one of a kind in Spain.
The person liable for the tax is always the one who receives the assets, whether as an heir, legatee, or donee.
Inheritance vs. Gift: Key Differences
Inheritance (Succession)
The transfer occurs upon death (mortis causa). Heirs acquire the assets of the deceased. Taxation is generally governed by the regulations of the region where the deceased resided.
Gift (Donation)
The transfer is made between living persons (inter vivos). The donor voluntarily gives an asset. Taxation depends on the donee's region of residence or where the property is located.
Factors That Determine How Much is Paid
The final amount to be paid is not fixed; it depends on several factors:
- Value of the assets received: The larger the inheritance, the higher the tax.
- Degree of kinship: The most decisive factor. The closer the relationship, the lower the tax.
- Pre-existing wealth of the heir: If the recipient already has significant wealth, a multiplier can increase the tax.
- The Autonomous Community: This factor creates the most inequality, as regions regulate reductions and rebates.
Kinship Groups
Understanding these groups is essential for estimating the tax:
| Group | Kinship | Tax Treatment |
|---|---|---|
| Group I | Descendants and adopted children under 21. | The most favorable, with the largest reductions. |
| Group II | Descendants 21+, spouses, ascendants. | Very favorable, with high reductions in many regions. |
| Group III | Siblings, uncles, aunts, nephews, nieces. | Considerably fewer tax benefits. |
| Group IV | Cousins, more distant relatives, and unrelated individuals. | The most unfavorable, with almost no benefits. |
What About Non-Residents?
Non-resident citizens who are residents of the EU/EEA can choose to apply the regulations of the Autonomous Community with which there is a connection point (e.g., the deceased's place of residence). This allows them to benefit from regional tax advantages.
How is the Tax Declared?
The tax is declared using self-assessment forms from the Tax Agency:
- Form 650: For acquisitions by death (inheritances). Must be filed within 6 months.
- Form 651: For "inter vivos" acquisitions (gifts). Must be filed within 30 working days.