When a resident or non resident individual passes away leaving some properties in Spain for his heirs, these heirs will be subject to pay the well known "Inheritance and gift tax". On the other hand, a "Gift Tax" is payable on the excess above a certain threshold when you receive a donation or a gift.

In practice, both taxes, which, in principle, have a very different nature, are paid through the same tax, the "Inheritance and gift tax".

What is taxable? Assets and rights left by the deceased individual are considered to be taxable assets and rights. This tax is also payable on assets you may have given away during your lifetime.

Who is liable to pay the Inheritance Tax? The Inheritance tax is to be paid by the beneficiaries receiving assets in the deceased's estate, no matter if these are gifts or donations made in Spain or even the beneficiaries of a life insurance policy.

How is it calculated? First of all, it depends on the value of the assets received by the heirs, this jeans the real value of the assets and rights, after discounting charges and deductible expenses.

What exemptions may apply? In principle, the outstanding debts of the deceased are exempted from the inheritance tax, provided that these debts are proved. Taxes paid to the State and the Spanish Autonomous Communities by the heirs are also exempted from the Inheritance Tax.

On the other hand, there are certain reductions that basically take into account the degree of kinship with the donor. This reduction varies, for example, whether the heirs are the spouse, children aged under 21, ascendants, adopted children, etc... The more distant the relative, the less reduction is applied. There are other allowances for those persons physically or mentally handicapped.

The tax is applied on the inherited estate taking into account not only its value but also who its beneficiary, whether this is a relative or not.

Documents and tax returns related to this tax should be submitted to the appropriate local entities where the assets are located.

When does the Inheritance Tax have to be paid? Declarations must be made, in case of death, within six moths of the date of death of the transferor, or the date of the death statement. In case of gifts, within 30 calendar days of the date following the conveyance of the gift. The following documents will be required: in addition to the official form, several documents will be required -Will, copies of the /NIF/ [Tax Identification cards] of all the heirs, death certificate, declaration of heirs, a certification of charges, expenses and debts. Other documents as title deeds, property tax receipts (rates), etc...

It could be a good idea to take all this into account so you can avoid to leave a heavy burden to your heirs, or, at least, to know what will be the expenses to be faced when you have passed away. In any case, it is always advisable to consult an economist - tax advisor- so you can obtain more specific information on this matter.