Taxes when you inherit a property
Are you inheriting a property in Spain? Or are you receiving gift property? The taxes to be paid are Successions/Gift tax and Capital Gains Tax (Plusvalía).
When you inherit property after somebody dies.
When you are the beneficiary of a life insurance policy and the insured person dies.
When somebody gives you his/her property while he/she is alive.
Who has to pay the tax? Where and when?
a) Mortis Causa (when somebody has passed away) The tax has to be paid by the heir getting the property. The heirs are named on the Will. If you are named on a Will but do not accept the inheritance, you do not have to pay the tax. If there is no Will, the heirs will have to be appointed by a Notary or Judge. Normally if there are children, they will be the heirs in the first place. The tax has to be paid where the deceased person had his/her domicile if he/she was a Spanish resident. If he/she was not a Spanish resident, the successions tax has to be paid where the property is located.
b) Life Insurance. The beneficiaries have to pay for the tax. The tax has to be paid where the deceased person had his/her domicile.
The term to pay the successions tax is of 6 months starting at the date of death. If the tax is not paid within the 6 months, you will have to pay a late fee.
c) Gift. The donee or person receiving the gift has to pay for Gift tax. The tax has to be paid where the donee resided. If the donee is not a Spanish resident, the tax has to be paid where the gifted property is located.
The term to pay the tax is when you receive the gift.
Plusvalía (Capital Gains Tax)
The Plusvalía tax has to be paid when receiving a property (inheritance or gift) and when the property is sold. If you receive a property and then sell it after one year, you will have to pay the Plusvalía tax twice, at the time you receive the property and at the time you sell it. If you sell the property you have received within the first year, you should pay the tax just once.
The tax has to be paid to the city council.
The term to pay the tax is 6 months.
The tax is calculated by the council and takes into account the increase of the value of the land and other details as future value. This is why sometimes we are required to pay the tax even if we have lost money with the sale. The Spanish Supreme Court ruled that if there is no actual gain when selling a property, the council should not charge the tax and the taxpayer has the right to claim it back.
Claiming it to the city council can be very complicated because if they do not solve the problem out of court, you should send a claim and the cost of hiring a lawyer and court representative is normally higher than the tax to pay. So the councils just wait to be sued because most people will not waste their money on this.