Posted in: Family Law
A new Inheritance Tax law has been approved by the Valencia Government on the 22nd November 2023. This modifies Law 13/1997, of December 23 in relation to inheritance tax and donations within the Valencia region.
Most importantly there is a big change with now discounts on inheritance and donation tax of 99% for most close relatives. This includes benefits for the first time for gifts to spouses for example.
For many years in the past Inheritance Tax in the Valencian Community was very generous. However, in the harshest years of the economic crisis tax discounts decreased and people paid more. Non-Residents of Spain in recent years, if a parent or child or spouse of the deceased, have, in general, only had a 100,000€ tax free allowance for an inheritance.
The Valencia government realises that high inheritance tax changes citizen behaviours regarding savings and investment. Plus it taxes the transfer of assets and income that have often already been taxed before. In addition, the tax is required in painful circumstances due to the loss of a family member. And added to this are the other taxes, fees and related expenses for the transfer of property. It can be very difficult for many families to find inheritance tax and costs. Therefore the Valencia government has changed the law, so it is in line with many other regions. They are able to do this because Regions are autonomous and allowed to modify certain tax regulations.
A bonus of 99% (99% tax discount) after the calculation of the tax rate on amounts obtained by relatives of the deceased belonging to groups I and II (parents, children, grandchildren, grandparents and spouses).
Also this is the same for donations or gifts to spouses, parents, children or adoptees of the donor.
This is a very important change. Why? As it reduces inheritance tax to virtually nil on all assets in the Valencia Community. Before, tax (often considerable) was paid above 100,000€ in many cases.
And previously donations or gifts of property or assets to spouses did not have tax-free allowances.
This measure is backdated to May 28, 2023. For taxable events before May 28, 2023 (so prior to deaths or transfers), the previous reductions will continue to apply. Also importantly, the rules for Group III and Group IV beneficiaries remain unchanged. This is nephews, nieces, step-children (Group III) and unrelated or distant relatives (Group IV).
Similarly, the following reductions will be applicable:
– Acquisitions for children or adopted children under 21 years of age: 100,000 euros, plus 8,000 euros for each year under 21, without the reduction exceeding 156,000 euros.
– Acquisitions by children or adopted children aged 21 or over, by the spouse, parents or adopters: 100,000 euros.
– Acquisitions by grandchildren: 100,000 euros, if the grandchild is 21 or older, and 100,000 euros, plus 8,000 euros for each year if the grandchild is less than 21 years old, without, the reduction exceeding 156,000 euros
– Acquisitions by grandparents: 100,000 euros.
And thereafter a 99 percent discount on the tax rate of the Donation Tax for all those in the above catagories.
Please note that for these above reductions all gifts/donations from the same donor made in the five years previously will be taken into account.
Plus for the reduction, it is required that the gift is made in a public document, or formalized within the tax declaration period. We can assist with this.
If the donated goods consist of cash, the origin and way that they are transferred must be declared.
With effect from May 28, 2023 for taxable events, inheritance and gifts of individuals will be taxed as follows:
They will enjoy a 99 percent discount on the tax rate of the Inheritance and Donation Tax for :-
a ) Acquisitions by death for relatives of the deceased belonging to groups I and II (children, grandchildren, parents, grandparents, spouses).
b ) Gifts made by the spouse, parents, adopters, children or adoptees of the donor.
The same bonus will be applicable to grandchildren and grandparents
This new law will have a huge positive impact on inheritance tax paid on Estates, especially larger ones. However unfortunately it does not help more distant relatives nor common law partners.
We can help with probate or inheritance situations or donation and gifting. Please remember that this article refers to inheritance and gift tax only in the Valencia region, but we are able to assist with inheritance and donation all over Spain.