SPAIN Inheritance and gift tax

INHERITANCE and GIFT TAX

contents – SPAIN Basics Taxable persons Fiscal residency/nationality Spanish inheritance tax regulation Taxable base for taxpayers or deceased non-residents Tax basis Allowances Tax rates. Quote multiplier coefficient Double taxation relief Agreements exist with the following countries International double taxation relief. Trusts / Donations and examples

Basics a.a. Taxable persons - Fiscal residency/nationality Spanish fiscal residence concept Individuals who remain in Spain for more than 183 days during a calendar year. Except tax residence certificate in another country. His main base or centre of activities or economic interest is, directly or indirectly in Spain. It is presumed the residence in Spain when his spouse-not legally separated and underage dependent children are permanent residents in Spain. This concept is applicable also for inheritance tax purposes but the estimation of the 183 days is for the last year period. Nationality: Individuals of Spanish nationality who prove their new residency in a tax haven, will continue to be deemed residents in Spain for income tax purposes during 5 years. It is not clear if it this presumption is applicable for inheritance and gift tax purposes.

Basics a.b. Taxable persons – Spanish inheritance and gift tax regulation Spanish Inheritance and gift tax regulation Taxpayer residence - Resident: Worldwide income. Non-resident: Assets located in Spain or rights exercised in Spain. b) Assets located in Spain: Real Estate. Other assets related with real estate located in Spain. Spanish life insurance. Rights exercised in Spain (v.g. Spanish company shares). Foreign residents who opt to pay as a non-residents for income tax purposes also are taxed as a non-resident for Spanish inheritance tax purposes.

Spanish Inheritance tax regulation Basics a.b. Taxable persons – Spanish inheritance and gift tax regulation Spanish Inheritance tax regulation Taxpayer Resident: Autonomous Community (CCAA) regulation. b) Taxpayer or deceased Non-Resident: Estate regulation.

GREEN ZONE: CCAA where there is no taxation or very reduced for inheritance and gift tax. ORANGE ZONE: CCAA where there is no taxation or very reduced for only inheritance tax. RED ZONE: CCAA where there is no relevant measures for reducing taxation. Basics a.b. Taxable persons – Spanish inheritance and gift tax regulation Taxpayer resident: Autonomous community disperse regulation

1. Basics b.a. Taxable base for taxpayers or deceased non-residents-Tax basis In general, the valuation of the assets is the real value. Specifics valuations Real estates: Market Value. Skills for the valuation by Tax Administration: Expert appraisal Insurance policy The value given in other transfer (before or after). Business assets: Book value. Shares of corporations and partnerships: The highest of: Nominal value Net asset value (except real estate companies) Capitalized value

Spanish personal allowances only for inheritance tax Basics b.b. Taxable base - Allowances Spanish personal allowances only for inheritance tax Tax class Categories of beneficiaries Allowances I Children, grandchildren, great-grandchildren smaller than 21 years old + General: 15.956,87 EUR + For each year less that 21 years old of the beneficiary: 3.990,72 EUR Limit for both concepts: 47.858,59 EUR II Children, grandchildren, great-grandchildren older than 21 years, spouses and grandparents III Siblings, stepchildren, stepparents, parents and children in law, aunts, uncles, nephews and nieces. + General: 7.993,46 EUR IV Others There is not reduction

b.b. Taxable base – Allowances Basics b.b. Taxable base – Allowances Other Spanish allowances: Tax class Concept Allowances Inheritance tax Life insurance 100% with the limit of 9.195,49 EUR Inheritance and gift tax Shares of family corporations 95% of the net value. They are different conditions in inheritance and gift tax. Family Business assets Habitual residence Some conditions have to be met. Inheritance tax and gift tax Historic patrimony assets Farm enterprise 50% to 95% of the net value.

Inheritance and gift tax Basics b.c. Taxable base-Tax rate scale Inheritance and gift tax 7,65 8,50 9,35 10,20 11,05 11,90 12,75 13,60 14,45 15,30 16,15 18,70 21,25 25,50 29,74 34,00 0,00 611,50 1.290,43 2.037,26 2.851,98 3.734,59 4.685,10 5.703,50 6.789,79 7.943,98 9.166,06 15.606,22 23.063.25 40.011,04 80.655,08 199.291,40 Rest (%) Quote (EUR) Up to (EUR) 0,00 7.993,46 15.980,91 23.968,36 31.955,81 39.943,26 47.930,72 55.918,17 63.905,62 71.893,07 79.880,52 119.757,67 159.634,83 239.389,13 398.777,54 797.555,08

(See tax class in personal allowances) Basics b.d. Taxable base- Quote multiplier coefficient Pre-existent wealth Tax class I & II III IV (See tax class in personal allowances) From 0 to 402.678,11 EUR From 402.678,11 to 2.007.380,43 EUR From 2.007.380,43 to 4.020.770,98 EUR More than 4.020.770 EUR 1,0000 1,0500 1,1000 1,2000 1,5882 1,6676 1,7471 1,9059 2,0000 2,1000 2,2000 2,4000

2. Double taxation relief a. Agreements with the following countries Tax treaties covering inheritance tax Greece Sweden France There is not tax treaties covering gift tax. b. International double taxation relief: Individual resident who pay for his worldwide income can deduct to the taxable quote the lower of: The amount paid in the foreign country. Spanish tax rate average taking into account all the assets received.

3. Trusts / Donations and Examples Trusts: In Spain there is not Trust legislation. Vehicles to avoid inheritance and gift taxation: To reduce taxation: To set up an active company or a business activity. To avoid o reduce taxation: being resident in Green or Orange Zone’s CCAA (the individual has to remain in this CCAA during at least 5 years). or in a foreign country

3. Examples UK resident’s inheritance with a beneficiary resident in Spain: Application of International double taxation relief in spite of the taxpayer in both countries is not the same: In UK are the executors who pay the inheritance. In Spain is the beneficiary who pay the inheritance.