Here we will look at the principal methods by which tax can be legally reduced by taking advantage of the available deductions.
It may firstly be stated that under Cantabrian law, any unmarried couples that are registered as 'parejas de hecho' in conformity with existing regulations are treated as a married couple for the purposes of the application of the deductions legally permissible by the Laws of Succession.
1) The Cantabrian law has provided for the following deductions based on the proximity of the relationship between the heir and the deceased:
Group 1 heirs (children of the deceased under age of 21) - a deduction of 50,000 plus 5,000 for each year under 21 up to a maximum deduction of 50,000
Group 2 heirs (children over the age of 21, spouses, parents) - a deduction of 50,000 is applicable
Group 3 heirs (3rd Grade relatives) - a deduction of 8,000 is available
Group 4 heirs (4th grade relatives) - no deduction available
2) In addition to any reduction available as a result of being related to the testator, a further deduction may be applied as a result of the heir being disabled. For those who have a disability between 33% and 65%, as officially determined, may apply an additional 50,000 deduction. Should the disability be over 65% then the applicable deduction is 65%.
3) An heir who is either the spouse, child (adopted or otherwise) or parent who benefits personally from a life insurance policy held by the deceased shall be entitled to a deduction (based on a calculation related to the amounts used for the estimation of damages in road traffic accidents).
4)Any family business including those related to farming, agriculture and fisheries may have a 98% deduction made on the value of the business before calculating the tax due under inheritance tax. The business must be maintained for a period of at least five years and if there are no descendants then the benefit of this deduction may be extended and applied to relatives up to the third grade. Spouses will always benefit from a 98% deduction in this regard.
5) With respect to the family home, a deduction of 98% may be applied to the attributed value where the beneficiaries are the spouse, children, parents or any relative over the age of 65 who has spent at least the two years prior to the death of the testator living in the family home.
6) If any assets have been transferred as the result of an inheritance more than once within a period of ten years then any tax paid on a transfer may be deducted from the tax due on a subsequent transfer.
To obtain a free and exclusive guide on this topic (the only one available in English on the web) go to:
Overview and Loopholes in Spanish Inheritance Tax
For information related to this particular topic please go to:
inheritance tax Spain
