Have you heard about inheritance tax law? When a loved one dies, in addition to unforgettable memories, they also leave us a material legacy that can be life-changing for some.
But, when inheriting property and rights, we also find ourselves with a new obligation that many people are unaware of: this tax has to be paid.
What is Inheritance and Gift Tax?
When we talk about Inheritance Tax and Gift Tax, we are referring to a tax liability that, in Spain, must be paid by any individual who receives goods or money in an inheritance or gift:
- On the one hand, Inheritance tax is levied when a person dies and leaves property and rights to his or her heirs., such as houses, money or shares. For them, this means an increase in their assets, which is why they have to pay this tax.
- On the other hand, Donation Tax means that, if you receive any kind of donation, you will have to (during the grantor's lifetime, not after his death), you also have to pay for it.
What are the rules and how much do you pay? The amount can vary depending on a myriad of factors. How much what you inherit is worth, your relationship or degree of kinship with the deceased and the specific rules of each autonomous community are some of the most relevant.
Fortunately, there are situations in which the quota may be reduced. For example, when we receive an inheritance from our parents or when we inherit the house in which we lived with the deceased person, we usually benefit from tax relief or exemptions, but there are also times when this tax can be expensive!
Payment of inheritance tax after an inheritance, how and when is it paid?
If you are the beneficiary of an inheritance, you become the taxpayer of this debt, so you must file the inheritance tax and the inheritance tax. The tax is payable within six months of the death of the deceased. However, it is also possible to apply for an extension of another six months before the end of the initial period.
Donation tax must be submitted and paid at the latest, 30 working days later of the date on which the donation was made.
How to file the tax? At the Tax Agency office of the Autonomous Community in which the deceased resided or in which the deceased's assets are located.
To pay inheritance tax, you will need the following documentation:
- Death certificate.
- Certificate of Last Will and Testamentary Acts, if available.
- Inventory of inherited assets.
- Documentation proving the value of the goods at the time of death.
What happens if an heir decides not to pay inheritance tax?
As we have been saying, In the case of an inheritance, it is compulsory to pay this tax after receiving an inheritance. If an heir chooses not to do so, he or she will face a number of legal and financial consequences and may not even get to enjoy what he or she has received!
There are several possibilities:
- If payment is made out of time without having requested an extension, the heir will have to bear surcharges and possibly interest for late payment.
- If you fail to repay the debt, you will be incurring a tax infringement minor, serious or very serious, subject to varying penalties.
- If you want to renouncing the inheritance, You must do so within a specific time limit and before accepting any benefits from it. If you do not arrive on time, you will remain liable for the payment of this tax.
- If it is never paid, the Tax Administration will initiate a enforcement procedure, which may result in the seizure of assets.
In addition, in order to register the inherited property in the corresponding registers - such as the Land Registry in the case of real estate - it is necessary to present proof of payment of inheritance tax. Without this payment, the transfer of ownership cannot be formalised.
What is the applicable legislation in each Autonomous Community?
The general framework for this tax is set out in the Law 29/1987 of 18 December 1987., Inheritance and Gift Tax.
But, as we have already mentioned, in our country, the autonomous communities have powers to regulate certain aspects of this tax. For example, deductions, reductions, tariffs and deadlines, which is why the amount to be paid can be so variable!
Madrid, for example, is one of the communities with the most significant advantages, with a 99% rebate on the tax quota for acquisitions between direct relatives.
How can life insurance help you pay this tax debt?
There is something quite interesting that we haven't talked about yet: the LIFE INSURANCE can be a very effective tool for managing and planning the payment of inheritance tax or, in other words, submitting the self-assessment.
Why? Because they can alleviate the financial burden involved.
And the fact is that, Upon the death of the insured, your life insurance policy can provide beneficiaries with immediate liquidity. This money may even be exempt from being included in the inheritance tax base, which means that it would not be considered part of the inheritance.
In this way, it can be used to pay the tax without having to sell other important assets or assets with high sentimental value.
Hence, selecting carefully from among the best life insurances is essential. To do so, it is best to have professional help, as the one we can provide you with in PIB Group Iberia.
As your trusted insurance broker, we will guide you through the inheritance tax self-assessment process without any hassle. ¡Contact with us, Don't delay any longer!
