General guides to Spanish inheritance tax if you are a resident in Andalucia.(Almeria, Granada, Malaga,Sevilla, Huelva, Jaen, Cadiz and Cordoba)

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1 General guides to Spanish inheritance tax if you are a resident in Andalucia.(Almeria, Granada, Malaga,Sevilla, Huelva, Jaen, Cadiz and Cordoba) We are inheritance tax experts. We will make sure you pay no more than strictly necessary. In practice Spanish citizens and resident in Spain pay a different level of inheritance tax depending on what region of Spain they live in as each regional government created extra exemptions for it's own citizens/residents. Since the sentence of the ECJ of 3rd of September of 2014 non residents of the European Union who inherit assets in Spain will be entitled to claim the exemptions of the regional government that offers the closest connection to the estate if this is in their benefit. (this is because the European Court of Justice considered that non residents where being discriminated). Inheritance tax for residents in Andalucia (and since the sentence of the ECF of 3rd of September of 2014 for non residents who inherit assets in Andalucia if the estate and the deceased did not have a closer connexion to a different region of Spain) Spanish inheritance tax is complex as there are both national and regional variations. For regional rules to apply (which often establish higher exempt amounts specially for descendants and spouse) it is necessary for the heirs to have been resident in the region for the larger part of the last five years. (since the sentence for the estate to have the maximum connexion with that region)

2 When is inheritance tax due in Spain? Spanish inheritance tax forms need to be presented always always if the heir is resident in Spain. If the heir is non resident in Spain he or she will only declare the assets situated in Spain at the date of death (the exception to this is life insurance payment made by a foreign life insurance company that operates and contracts in Spain, which also need to be declares in Spain). In Spain tax is calculated and paid by each heir and not by the estate. Where do you pay your tax? If you are a non resident beneficiary you pay to the Agencia Tributaria, (in Madrid )while if you are a resident beneficiary you pay to the regional government (tesoreria general de la junta de Andalucia ). It is done by sel assessment.get this wrong and you are looking at a problem of biblical proportion. Since the sentence we have a crazy situation where if you are a nonresident you have to pay the national tax office but using the exemption rates of exemption offered by the corresponding regional government) Tax payable The amount payable by each heir depends on a number of factors such as: Value of asset inherited Relationship between deceased and beneficiary Pre-existing wealth of the beneficiary

3 Calculation of inheritance tax is done in 4 steps. 1. We determine the value of what each heir is called to inherit. (Please read the article on benchmarks regarding valuation of property) Ask your solicitor to talk about benchmark values. If he puts on a strange face, change solicitors. 2. We establish the exemption which will depend on the family relationship with the deceased: Group I - Children & adopted children of less than 21 years of age [deduction EUR 15,956.87] Group II - Children & adopted children of more than 21 years of age, spouse, parents, grandparents [deduction EUR15,956.87] Group III Brothers, sisters, aunts, uncles, nieces, nephews & step children (not adopted) [deduction EUR7,993.46] Group IV more distant relatives and strangers. (No deduction). Different parts of Spain have created extra exemptions for the residents in their jurisdictions. In Andalucia group I heirs are entitled to pay no inheritance tax if the estate is u n d e r Euros. If one euro over the limit you Where the pay on all but the first Euros the same as deceased and heir non-residents. Sometimes it is convenient to lived within Spain can divide us the estate to get the heirs under the make a big difference to euro Inheritance tax. Dying in and in extreme cases with high value estates Valencia is cheaper to move residence to a region of than dying in Spain with h i g h e r e x e m p t i o n r a t e s f o r Andalucia. descendants and spouse.

4 Example of how simple estate planning can make a difference: A couple with two children (all resident in Almería) with one house worth euro in joint names and joint accounts and investments worth euro. If the husband dies with a will leaving everything to her husband, the total inheritance tax would be based on an estate of euro just under euro. If the husband dies leaving his estate euro between his wife and two children in 3 equal shares the tax would have been: 0. Giving some thought to the tax implications of a will in this case would have saved this family: euro. Why such a difference? Each child and spouse is entitled to inherit euro tax free. If the heir receives above that amount the only exemption is euro. 3. We apply the sliding scale to what each heir receives: Spanish inheritance tax rates Tax base Tax Marginal % , , , , ,

5 31, , , , , , , , , , , , , , , , , , , , , , , , We apply a multiplier to the final amount which will depend on the relationship with the deceased. Group I and II: Multiply the amount by I. Group III : Multiply the amount by 1,5882 Group IV: Multiply the amount by 2. If the pre-existing wealth of the heir is over euro then the multiplier can be higher still. Spanish law requires that an inheritance be declared and all taxes paid within 6 months of death. A six month extension can be requested if done so within five months of the Six months to pay inheritance tax.

6 death. Surcharge & interest on late payment Number of months Surcharge/Interest late in making payment 0 to 3 5% 3 to 6 10% 6 to 12 15% % + statutory interest Davies Solicitors S.L.U All rights reserved