Inheritance Tax Reform in Andalusia, what you need to know

After an agreement between the political parties PSOE and Ciudadanos the Inheritance Tax in Andalusia is reformed as of January 1, 2018.

Like many others, this tax is the result of “the regulation that each autonomous community exerts on a tribute yielded by the State,” which has little support as it is considered excessive.

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Agreement between PSOE and Ciudadanos

Both political parties have reached an agreement on the inheritance tax that will also allow the approval of the budgets of the Government of Andalusia for the next year, and said accounts depended on the decision of that Government to accept “the condition of Ciudadanos to fully subsidize the tax of successions for those who inherit less than one million Euros.”

According to the last financial year, the measure benefits 95% of inheritances.

Thus, Ciudadanos deprives the PP of this achievement that had demanded since 2009, which Juan Manuel Moreno, president of the political party PP of Andalusia, had resumed at the beginning of the legislature, but it was Juan Marín of Ciudadanos who brought it back to discussion until the Andalusian Government gave into the proposal signing the agreement.

It is important to clarify that this reduction of the inheritance tax was not considered in the alliance (Ciudadanos -socialists) that took Susana Diaz to the presidency of the regional Government.

The alliance considers this measure as a priority to clean up the accounts of this community over the next period, therefore, the decision also included the approval next year of the corresponding budgets of the Andalusian Government, so the regional government ensures budgetary stability until 2019. President Susana Diaz also stressed that it will be the first community to approve these budgets, money that will be directed, according to Díaz, to social causes and “the needs of the Andalusians,” as well as everything that “has impact on their quality of life.”

It is estimated that the measure will have an impact of 83 million Euros on public coffers, considering the settlements of 2016.

The exempt ceiling of the tribute amounts to one million Euros

The figure of one million Euros is considered by heir not by inheritance. Therefore, a father can leave two million Euros distributed, one to each son, freeing both of them from paying the tribute. Additionally:

  • This limit corresponds to the payment of the assets to the relatives of groups I and II, that is, spouses, children, grandchildren and parents.
  • Siblings, uncles, cousins and nephews (belonging to groups III and IV) will continue paying the same amount they have paid until now.
  • Any heir who receives property from a deceased direct relative, where the sum of the assets does not exceed one million Euros, will benefit from the agreement.

It is worth mentioning that if the inheritance reaches 1,000,001 Euros, then the same is only taxed for one Euro and the rest would be exempt. Previously, the taxpayer had to pay an additional sum of up to 47,000 Euros for an extra Euro to the amount.

  • The previous net worth of the heir shall be always considered. Thus, to benefit from this exemption, the heirs must not possess previous assets (over one million Euros).
  • The measure is not retroactive, and payments processed before January 1st will not be affected.

Although the citizens gathered under the platform Stop Impuesto Sucesiones [Stop Inheritance Tax] are grateful for the intention of Ciudadanos and PP to reduce the amount to pay, they consider that this variation is insufficient and does not correspond with those enjoyed by other communities of the country, besides criticizing the lack of change in case of the inheritance between siblings, uncles, cousins and nephews.

Additionally, these Andalusians fear that, despite what has been promised, there will be last minute adjustments during budget discussions.

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This act (donation) responds to an intention in life of the donor, while the inheritance represents the intention in a testamentary disposition. These are two economic options that must be carefully adjusted and analyzed before choosing any, especially in Vélez-Málaga, Torre del Mar, Frigiliana and Benajarafe, since donating or leaving in inheritance can make the difference if the beneficiaries are not direct relatives.

If you live in La Axarquía, in municipalities such as Frigiliana, Benajarafe, Vélez-Málaga or Torre del Mar, you can contact us for solicitor or accountant services related to inheritance tax.

Getting and inheritance instead of a donation generates the payment of less taxes in all Andalusia, as this autonomous community stipulates a quota with fewer reductions.

Since these initiatives are different, their consequences have been discussed until reaching an agreement, thus, establishing also a limit of one million Euros for donations that will not tax up to this amount if they are between direct relatives (parents and children).

Other conditions were also introduced as exemptions in the agreement reached by the political parties Ciudadanos and PSOE, such as fact that the total amount of these donations is used for “the incorporation or expansion of an individual company or family business, with tax domicile in Andalusia.”

Conditions to consider

The donation “must be formalized” through a deed and incorporate the company “within a maximum period of six months from the date when the money was obtained,” and keep it active in the project for about five years after the date when the donation becomes public, except if the recipient of such donation dies within that period.

Businesses related to the management of movable or real estate assets are excluded from these companies.

The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.

Solicitor in Torre del Mar , Velez-Malaga and Torre del Mar

Author: Ana Rodríguez Peláez
Biographical Info: Ana Rodríguez Peláez is an English speaking tax advisor specialised in Andalusian holiday rentals, rental tax for non-residents and personal income tax.

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