Succession Tax in Spain: Two Sides of a Controversy

Succession tax is controversial in every country. Most people do not like to pay taxes, and having to do so after someone you loved has passed away is especially hurtful.

In Spain, as in most other countries, you have to pay taxes when you earn money. It could be your salary, a lottery prize, the selling of a property, or even a donation. No matter what, when you earn money, you pay taxes.

Most critics against succession rules say the grantor has already paid taxes for the goods that they are passing to their heirs. However, the fact is that you are a different person to the grantor, so when you get your inheritance, you are gaining new wealth. Thus, as the regulations are now, when you inherit, you need to pay taxes. In other words, the tax authority considers you as a person and doesn’t take the family as the unit to measure.

In Spain, the controversy is enhanced by the fact that succession tax is ruled by the autonomous community, which means big differences between the citizens of different regions.

The biggest parties at the moment (PP and PSOE) agree that the tax should be harmonised for the full country, and they also have the support of the Ciudadanos party (liberal). However, left wing parties (mainly Podemos) are against reducing the tax for the richest people, while regional and independent parties (most of them in Catalunya) are always against anything that means centralization. They may agree to reduce the tax, but they will never support the tax decision going back to the central government.

This mixture of interests makes the controversy especially interesting for political journalism, but brings some insecurity to the citizens who can’t be sure when to try donating, when to wait for the death to inherit more money, or when try and change their residency to take advantage of a more liberal fiscal system in another region. Does the latter sound too exaggerated? Actually, in 2017 the leader of the PP in Andalucia stated that Madrid discounts 99% of succession tax, and that 40,000 people move from Andalucia to Madrid every year. This is a kind of game of words in which he seems to suggest, without actually saying it, that the succession tax has a big impact on these people.

We cannot say whether the 40,000 Andalusians moving to Madrid do so because of the taxes; the truth is some municipalities of Andalucia have the highest unemployment rate of the country. Nevertheless, from the point of view of someone with a big inheritance, the move could make financial sense, if it is possible.

Succession tax is one of the most difficult issues to overcome when you have an inheritance in Spain. If you need help, just call us now!