The Spanish Inheritance and Gift Tax (Ley 29/1987) is the responsibility of the Spanish regional governments (Comunidades Autónomas).
According to this law, who is resident in Spain (183 days rule) is liable for this Tax for all the assets inherited, regardless of where they are located.
The Spanish income tax is regulated according to Law 35/2006 (Income Tax Law LIRPF) and Regulation RDR439/2000 (Income Tax Regulation RIRPF)
It is a dual taxation system as it applies to two different types of income, each having its own tax rates:
- The general tax base, which is taxed progressively
The Law on Spanish Wealth Tax dates from 1991 (Ley 19/1991). The tax rates have not changed since then. While in 1991 the interest rate in Spain was about 10 to 15 per cent, they are now at 1 per cent. If someone in 1991 had to pay 1.7% for wealth taxes, this was acceptable, as these assets were far more profitable than they are today. Thus the actual impact of Wealth Tax has increased significantly as a result.
The real estate transfer tax in the Balearic Islands has a variable rate, from 8% to 10%. Amongst Spanish regions the maximum tax bracket vary between 6% to 11%.
Up to 400.000 Euros the tax rate is 8%. From 400.000,01 to 600.000 Euros it is 9%. From 600.000,01 Euros onwards the rate of 10% is applied.
Detached parking spaces, which are not connected to the apartment, are taxed with 8% but this only up to a value of 30.000 Euros. What exceeds this amount is taxed with 9%. Attached parking places are admitted in the unique tax base till 2 units per apartment.
In the following, we present the main tax changes you must consider if you have already invested in Spain or if you’re thinking about investing or to do business in this country.
1. As a result of the recent judgment of the European Court of Justice (judgment of 09.03.2014), with which the unequal tax treatment of tax residents and non-tax residents was declared illegal, the tax on the inheritance of property in Mallorca between relatives amounts to 1%.