Inheritance tax in Spain for expats: how it works and the 99% credit in Murcia

Inheritance tax is one of the topics that worries expats most, often because of stories about other regions or old rules. The good news for families in the Region of Murcia is that, for close relatives, the tax burden is much lower than many people expect. Here’s how it works.

Who pays inheritance tax in Spain

In Spain, inheritance tax (Impuesto sobre Sucesiones y Donaciones) is paid by the heirs, not by the estate. Each heir pays on what they receive. The rules are set by the State but the regions (comunidades autónomas) can apply their own reductions and tax credits, which is why the bill can vary so much from one region to another.

Which region’s rules apply generally depends on where the person who died was resident. Since court rulings a few years ago, non-resident heirs can in most cases also benefit from regional rules, instead of only the less favourable State rules.

The 99% tax credit in the Region of Murcia

The Region of Murcia applies a 99% tax credit (bonificación) on inheritance tax for close relatives: spouses, children and descendants, and parents and ascendants. In practice, for these heirs, the tax due on an inheritance is reduced to a small fraction of what the general scale would give.

That doesn’t mean there’s nothing to do: the heirs still have to file the return, and other costs apply, such as notary fees, registration and, where a property is inherited, the municipal capital gains tax (plusvalía municipal). Siblings, nephews, nieces and unmarried partners who aren’t in those groups may face a very different bill, so check your case.

Deadlines

The inheritance tax return must generally be filed within six months of the date of death, and an extension can be requested within the first five months. Missing the deadline leads to surcharges.

Where life insurance fits in

Life insurance is a useful tool in inheritance planning:

• The payout goes directly to the beneficiaries you name, without waiting for the whole estate to be settled.

• It gives your family liquidity to pay taxes, notary costs and expenses while the rest of the inheritance is processed.

• In Spain, life insurance payouts are generally subject to inheritance tax for the beneficiary, but close relatives in Murcia also benefit from the regional tax credit.

See our life insurance for expats, or Allianz Capital if you want to keep a capital intact to pass on while receiving the interest.

Don’t forget the will

Inheritance tax is only one part of the picture. Which country’s law governs your succession, and who inherits, depends largely on your will. We explain why many expats make one in Spain in do you need a Spanish will?.

An important note

Tax rules change and every family is different. This article is general information, not tax advice: always check your specific case with a lawyer or tax adviser.

How we can help

We help expat families in Murcia plan how their savings and insurance will pass to their loved ones, and we work with lawyers and tax advisers when needed. Come to our office in central Murcia or book a video call in English.

Plan ahead with us

Contact us to review your life insurance and savings with your family’s inheritance in mind.