Inheritance tax in Spain: Considerations when receiving an inheritance from abroad

Receiving an inheritance is a significant event in anyone’s life. If, in addition, the inheritance comes from abroad and you are a tax resident in Spain, the taxation and procedures can seem complex.

In this article, we explain everything you need to know about receiving an inheritance from abroad as a Spanish tax resident.

We will address topics such as:

• What taxes must be paid in Spain on an international inheritance.
• The legal procedures and deadlines you must comply with.
• How to declare inherited money and when to file Form 720.
• What to do to avoid double taxation and problems with the Spanish Tax Agency.
• International taxation agreements that can reduce your tax burden.
• The importance of obtaining specialised advice on international inheritances.

Please note: this guide provides general information and should not replace personalised advice from a lawyer specialising in international inheritance and tax law. Each case depends on the country of origin, the type of inherited assets, and your personal circumstances.

If you have received or expect to receive an inheritance from abroad, our team of tax lawyers at AGM Abogados can assist you with tailored, cross-border advice.

What happens if you receive an inheritance from abroad?

The first key step is to determine your tax residence, as this determines whether you must pay inheritance tax in Spain. You are considered a tax resident in Spain if any of the following criteria are met:

• Your habitual residence is in Spanish territory.
• You spend more than 183 days during a calendar year in Spain (Law 35/2006).
• You may also be considered a resident if your main center of economic, family, or professional interests is in Spain, even if you spend less time in the country.

Note: Tax residency is assessed for the year in which the deceased passes away, as this determines whether worldwide assets must be declared.

What legislation applies to an inheritance from abroad

Each country has its own inheritance regulations, so it is important to clearly understand what legislation applies when receiving an inheritance from abroad in Spain.

When there is an international element, Private International Law applies. This determines whether the laws of:

• The deceased’s nationality,
• The country where the assets are located, or
• The deceased’s habitual residence

Spain’s Gifts and Inheritance Tax (LISD): How does it work?

The tax governing the inheritance of foreign assets in Spain is the Inheritance and Donations Tax (Impuesto sobre Sucesiones y Donaciones, ISD), established under Law 29/1987 (LISD).

This law distinguishes between two types of tax liability:

• Personal liability: applies to individuals who are tax residents in Spain. In this case, the heir must pay taxes in Spain on all assets and rights received through inheritance, whether located in Spain or abroad.
• Real liability: applies to individuals who are not tax residents in Spain, who are required to pay taxes only on assets or rights located within Spanish territory.

However, this general rule has exceptions in cases where Spain has entered into international inheritance agreements (Double Taxation Treaties – DTTs), which are designed to prevent double taxation in certain situations.

Which countries have a Double Taxation Treaty with Spain?

To date, Spain has only signed inheritance-related double taxation treaties with France, Greece, and Sweden. These treaties, known as Double Taxation Treaties (DTTs), aim to prevent the same asset or right from being taxed twice – once in the country of origin of the inheritance and again in Spain.

In practice, this means that if the heir is a tax resident in Spain and receives assets located in one of these countries:

• Certain assets, such as real estate, will be taxed only in the country where they are located.
• Other assets, such as life insurance policies or financial investments, may be taxed in Spain, depending on the provisions of the relevant treaty.

Therefore, to correctly determine the taxation of an international inheritance, it is essential to:

1. Confirm the heir’s tax residence (personal liability vs. real liability).
2. Check whether a Double Taxation Treaty exists between Spain and the country of origin of the inheritance.

Below are practical examples illustrating how a DTT is applied and what happens when no such treaty exists.

Example of the application of a Double Taxation agreement

To illustrate how Double Taxation Treaties work, consider the following example:

If a Spanish tax resident of French nationality inherits real estate located in France from their deceased father in that country, they will not have to pay Inheritance Tax in Spain.

This is because the double taxation agreement between Spain and France provides that real estate – including any appurtenances – is taxable only in the country where it is located. In this case, the heir will only be required to pay inheritance tax in France.

Example where no Double Taxation Treaty applies

When no Double Taxation Agreement exists with the country from which the inheritance originates, Spanish law applies.

According to Article 23 of the Inheritance and Gift Tax Act (LISD), a Spanish tax resident may deduct from the Spanish Inheritance and Gift Tax (ISD) the lower of the following two amounts:

• The amount actually paid abroad for a similar tax levied on the increase in net worth.
• The amount resulting from applying the average effective rate of the Spanish Inheritance and Gift Tax (ISD) to assets or rights located abroad that have already been taxed in another country.

Practical example:
An Italian national who is a tax resident in Spain inherits assets from his parents, who were residents of Italy.

• Since there is no DTT between Spain and Italy, Spanish law applies.
• As a Spanish tax resident, the heir is subject to personal liability under the ISD.
• The taxable base is calculated by including all inherited assets and rights, minus any deductible charges and debts.
• The heir may then deduct the tax paid in Italy, up to the limits established under Spanish law.

How to declare an inheritance received from abroad in Spain ?

Once you determine your tax residence and calculate the taxes due, you must fulfil certain formal obligations with the Spanish Tax Agency (Agencia Tributaria). This includes not only paying the Inheritance and Gift Tax (ISD) but also filing the required informational declaration for assets and rights located abroad, where applicable.

Among these obligations, the Form 720 (Modelo 720) stands out. This declaration allows the Tax Authorities to identify assets inherited outside Spain and to ensure that they are properly taxed.

Below, we explain who must file this form and the applicable deadlines.

When must form 720 be filed?

As mentioned above, when receiving an inheritance from abroad it is necessary to present Form 720, which is an informative declaration on the assets and rights to be inherited.

Those who must present Form 720 are:

1. Natural and legal persons residing in Spain.
2. Non-residents who settle in the country and receive an inheritance that exceeds €50,000.

Likewise, existing inheritances or communities of property must present this documentation in accordance with the provisions of article 35.4 of the General Tax Law. This legal entity refers to the hereditary estate from the moment of death until the acceptance of the inheritance.

During this period, the inheritance does not have specific heirs and, therefore, is considered “recumbent.” However, it is also necessary to present Form 720 with respect to these assets, which is under the supervision of an administrator.

If you are required to present Form 720 to receive an inheritance from abroad, you will have the opportunity to do so from January 1st to March 31st of each year. Failure to make this declaration may result in fines of up to €30,000.

Deadline to settle an inheritance from abroad

You have a period of 6 months from the death of the deceased to pay the corresponding taxes.

However, it is important to highlight that it is feasible to request an extension of 6 additional months to pay the Inheritance and Gift Tax.

How to prevent double taxation when inheriting from abroad?

As we previously mentioned, when receiving an inheritance of property or money from abroad in Spain, it is necessary to comply with tax obligations before the Tax Agency.

However, it should be verified whether taxes have already been paid in the country of origin of the inheritance to avoid double taxation.

If this is the case, it is possible to request a deduction in Spanish taxes for international double taxation.

What is the procedure for receiving an inheritance from abroad?

Once the legal formalities have been completed and the corresponding taxes paid, it is important to follow a series of practical steps to properly receive and manage the inherited assets. The usual procedure is as follows:

1. Ensure you are registered as a taxpayer with the Spanish Tax Agency (Agencia Tributaria).
2. Open or use an existing Spanish bank account.
3. Provide the bank with inheritance and tax documentation (translated and apostilled, if necessary).
4. Once verified, the bank can transfer the inherited funds to your account.

Why hire a specialist international inheritance tax lawyer?

International inheritances involve complex legal and tax considerations, including:

• Risk of double taxation between Spain and the country of origin.
• Possible penalties for incorrect or missing Form 720 declarations.
• Delays in accessing inherited assets.

A tax lawyer specialised in cross-border inheritance can help you:

• Minimise your tax burden in Spain.
• Ensure compliance with both Spanish and foreign tax regulations.
• Manage all required documentation accurately and efficiently.

At AGM Abogados, we have a team of experts in tax law and international inheritance matters. Contact our legal specialist team to resolve your case with confidence.