Inheritance Tax Deductions in the Valencia Region Inheritance

Inheritance Tax Deductions in the Valencia Region

Inheritance Law in the Valencia Region This presentation has been updated and is valid for 2018. * *Advocate Abroad does not accept responsibility for losses of any type consequent upon reliance on the information contained in this presentation. Please consult a lawyer before taking any action. 2

Inheritance Law in the Valencia Region In 2001 the Spanish government devolved the power to set inheritance tax rates and deductions to the regional parliaments. 3

Inheritance Law in the Valencia Region Most regions enacted tax laws that applied generous deductions only to those beneficiaries who were resident in the region over the balance of the previous five years. 4

Inheritance Law in the Valencia Region Recently, on September 3 rd 2014, the European Court of Justice ruled that such laws were discriminatory and contrary to European Law. 5

Inheritance Law in the Valencia Region Accordingly, the Spanish government has enacted new legislation (Ley 26/2014) which makes any deductions that may be applied to residents also available to non-residents who are EU citizens. 6

Inheritance Law in the Valencia Region The main impact of the new legislation is as follows: 1) If the deceased was a non-resident, living in another European country then the beneficiary may apply those deductions and exemptions provided by the regional government in which the majority of the inherited assets are located. 7

Inheritance Law in the Valencia Region 2) If none of the assets to be inherited are located in Spain, then the resident beneficiaries should apply the legislation enacted by the regional government where they are normally resident. 8

Inheritance Law in the Valencia Region 3) If the deceased was resident in one of the Spanish regions and the beneficiaries were non-resident, and living in another European Union country, then they may apply those deductions and exemptions available to residents of the region in which the deceased was resident. 9

Inheritance Tax Law the Valencia Region The regional level exemptions available the Valencia Region were enacted by the Valencia parliament and in their current form are specified in Law 13/1997. 10

Personal Exemptions Spanish Inheritance law first assigns beneficiaries to groups according to the degree of kinship with the deceased: Group I Children, including adopted children, under the age of 21 Group II All other descendants, spouses and parents Group III Close relatives such as brothers and sisters, grandparents, aunts and uncles Group IV More distant relatives 11

The following are the personal exemptions available in the Valencia Region : Deduction Group I Exemption of € 100, 000 plus € 8, 000 per year under the age of 21 up to a maximum of € 156, 000. Group II Exemption of € 100, 000 Group III No deductions available Group IV No deductions available 12

If the beneficiary is disabled: An exemption of € 120, 000, rising to € 240, 000 additional to any personal exemption if mental disability > 33% or physical > 65%, with gravity of disability increasing on a scale from 0% up to 100%. 13

Inheritance of the Family Home Exemptions exist for child, parent and spouse of the deceased with a value up to 95% of value up to max of € 150, 000 14

Deductions: Transfer of Family Business Tax exemption of 95% of the value of the business Should be children or spouse to inherit to benefit from the deduction 15

Deductions: Transfer of Family Business If no child or spouse any relative 'to third degree of consanguinity' may benefit from exemption Must maintain business for a period of no less than 5 years 16

Additional Discounts A 75% discount shall be applied to any resulting tax payable by those beneficiaries who are in Group I. Similar discount for those with physical disabilities > 65% or psychological > 33%. 17

Additional Discounts A 50% discount shall be applied to any resulting tax payable by those beneficiaries who are in Group II. 18

State Level Tax deductions on income from Life Insurance: An exemption of all tax on income from a life insurance policy up to € 9, 195, 45 Available where the beneficiary is the spouse, parent or descendant or adopted descendant 19

State Level Tax deductions on income from Life Insurance: The exemption is available to each beneficiary but only once regardless of number of life insurance policies 20

Other Deductions: As a general rule the following deductions may be made on any estate: Funeral Expenses Final Medical Expenses of the Deceased 21

Other Deductions Cntd: Debts held be the deceased that are evidenced by public documents e. g. a mortgage 22

Tax Rates the Valencia Region Once the final amount of tax payable is determined then it is necessary to apply the relevant rate: 23

Tax Rates the Valencia Region Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on Remainder (%) 0 0 7993, 46 7, 65 7993, 46 611, 5 7668, 91 8, 5 15662, 38 1263, 36 7831, 19 9, 35 23493, 56 1995, 58 7831, 19 10, 2 31324, 75 2794, 36 7831, 19 11, 05 39155, 94 3659, 7 7831, 19 11, 9 46987, 13 4591, 61 7831, 19 12, 75 54818, 31 5590, 09 7831, 19 13, 6 24

Tax Rates the Valencia Region Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on Remainder (%) 62649, 5 6655, 13 7831, 19 14, 45 70480, 69 7786, 74 7831, 19 15, 3 78311, 88 8984, 91 39095, 84 16, 15 117407, 71 15298, 89 39095, 84 18, 7 156503, 55 22609, 81 78191, 67 21, 25 234695, 23 39225, 54 156263, 15 25, 5 390958, 37 79072, 64 390958, 37 29, 75 781916, 75 195382, 76 En adelante 34 25

Existing Wealth Once the relevant tax rate has been applied the result is multiplied by a coefficient determined by the existing wealth of the beneficiary as well as the group to which they belong: Pre-existing Wealth Groups In Euros I y II IV From 0 a 390. 657, 87 1 1, 5882 2 From 390. 657, 87 to 1. 965. 309, 58 1, 05 1, 6676 2, 1 From 1. 965. 309, 58 to 3. 936. 629, 28 1, 1 1, 7471 2, 2 More than 3. 936. 629, 28 1, 2 1, 9059 26 2, 4

Existing Wealth The Groups referred to consist of the following beneficiaries: Group I Children, including adopted children, under the age of 21 Group II All other descendants, spouses and parents Group III Close relatives such as brothers and sisters, grandparents, aunts and uncles Group IV More distant relatives 27

Expert Probate Services in Valencia To find out how to get expert advice, in English, about how to reduce your liability for inheritance tax, go to: Expert Probate Services in the Valencia Region 28