inheritance tax deductions madrid
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Inheritance Tax DeductionsIn Madrid
This presentation has been updated and is valid for 2014.
Inheritance Law in Madrid
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There are special regional tax deductions and exemptions
passed by the local government in Madrid that only apply to
those beneficiaries who have been resident in the region.
Inheritance Law in Madrid
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If you have NOT been resident in Madrid then, when
determining your inheritance tax liability, you may only apply
the deductions and exemptions approved by the CENTRAL
government.
Inheritance Law in Madrid
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The central government exemptions and deductions are not
as generous as the regional exemptions.
This has caused complaints that the inheritance tax laws in
Spain are discriminatory against non-residents.
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Inheritance Law in Madrid
The regional level deductions available in Madrid were
enacted by the parliament in Madrid and in their current form
are specified in Legislative Decree 1/2010.
The most important changes to State laws can be
summarised as follows:
Inheritance Tax Law in the Madrid
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Spanish Inheritance law first assigns beneficiaries to groups according to the degree of kinship with the deceased:
Group I Children, including adopted children, under the age of 21
Group II All other descendants, spouses and parents
Group III Close relatives such as brothers and sisters, grandparents,
aunts and uncles
Group IV More distant relatives
Personal Exemptions
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These are the personal deductions as amended by regional law in Madrid. They are in addition to state exemptions:
Personal Exemptions
Deduction
Group IDeduction of €16,000 plus €4,000 for each year under
the age of 21 up to a max. of €48,000
Group II Deduction of €16,000
Group III Deduction of €8,000
Group IV No deductions available
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Spouse, descendants and parents of the deceased
A special discount of 99% on any tax payable on account of
any inheritance applies to those beneficiaries in Groups I or
II.
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If the beneficiary is disabled:
If the disability is classified as > 33% then an additional
deduction of €55,000 may be applied
If the disability is classified as > 65% then a deduction of
€153,000 may be applied
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Income Derived from Life Insurance Policies
A 100% deduction on amounts up to €9,200 where the
beneficiary is the:
• Spouse
• Child/Adopted Child
• Parent
This deduction applied independently of other deductions.11
Deductions in transfer of Family Business
Tax deduction of 95% of the value of the business
The deductions applies to sole trader entities and
participations held in other businesses
The business or participation should be maintained for a
period of at least 5 years
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Inheritance of the Family Home
If the main, habitual family home is inherited there is a deduction
of 95% up to the value of €123,000 per beneficiary.
This applies to beneficiaries that are the spouse, child or parent
of the deceased.
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The property may not be sold for a further 5 years after the
inheritance.
More distant relatives over the age of 65 may also benefit but
must have been living with the deceased in the property for a
period of at least two years prior to the date of death.
Inheritance of the Family Home cntd
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Inheritance of Special Awards
For inheritance of special indemnities paid to victims of
toxic shock syndrome or victims of terrorism those awards
may be reduced by 99%
The reduction applies where such indemnities are not
subject to Income Tax
Other Deductions:
As a general rule the following deductions may be made on any estate:
Funeral Expenses
Final Medical Expenses of the Deceased
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Other Deductions Cntd:
Debts held be the deceased that are evidenced by public
documents e.g. a mortgage
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Tax Rates in Madrid
Taxable Sum (€)Tax Payable On This
SumAny Remainder Up
To Applicable Rate on
Remainder (%)
0,00 0,00 8,313.20 7,65
8,313.20 635,96 7.688,15 8,50
16.001,35 1.289,45 8.000,66 9,35
24.002,01 2.037,51 8.000,69 10,20
32.002,70 2.853,58 8.000,66 11,05
40.003,36 3.737,66 8.000,68 11,90
48.004,04 4.689,74 8.000,67 12,75
56.004,71 5.709,82 8.000,68 13,60
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Tax Rates in Madrid Cntd
Taxable Sum (€) Tax Payable On This Sum
Any Remainder Up To
Applicable Rate on Remainder (%)
64.005,39 6.797,92 8.000,66 14,45
72.006,05 7.954,01 8.000,68 15,30
80.006,73 9.178,12 39.940,85 16,15
119.947,58 15.628,56 39.940,87 18,70
159.888,45 23.097,51 79.881,71 21,25
239.770,16 40.072,37 159.638,43 25,50
399.408,59 80.780,17 399.408,61 29,75
798.817,20 199.604,23 En adelante 34,00
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Existing Wealth
Once the relevant tax rate has been applied the result is multiplied by a coefficient determined by the existing wealth of the beneficiary as well as the group to which they belong:
Group/Coefficient
Existing Wealth (€) I & II III IV
0 to 402.700 1 1.5882 2
402,700 to 2,007,400 1.05 1.6676 2.1
2,007,400 to 4,020,800 1.1 1.7471 2.2
Over 4,080,000 1.2 1.9059 2.4
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Existing Wealth
The Groups referred to consist of the following beneficiaries:
Group I Children, including adopted children, under the age of 21
Group II All other descendants, spouses and parents
Group III Close relatives such as brothers and sisters, grandparents,
aunts and uncles
Group IV More distant relatives
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Each year in Spain thousands of expats pay more
tax on inheritance than they should – simply
because they fail to follow some simple rules.
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To find out how to get expert advice, in English, about how to
reduce your liability for inheritance tax, go to:
Expert Probate Services in Madrid
Expert Probate Services in Madrid
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