Inheritance tax in Madrid: How much do you pay for inheritance?

Inheritance tax in Madrid is the tax that all residents of the autonomous community that houses the capital of Spain must pay when they receive an inheritance. But how much inheritance tax do you pay here? Undoubtedly, this is a question that raises some doubts, so here we are going to give you an answer.a.

First of all, what is an inheritance?

Inheritance is the set of assets, rights and obligations that, when a person dies, is passed on to his or her legitimate heirs, whether or not by means of the provisions of a will. This ranges from homes or other types of real estate to money saved in current accounts, investment funds or pension plans, for example. It also includes jewellery and, of course, debts, which must be taken care of in order to receive the inheritance.

What are inheritance taxes?

Many people tend to think that the only thing they have to pay is inheritance and gift tax, which is regulated by state regulations and is applicable throughout the country, despite the fact that it is managed by the autonomous communities. This is the reason why Madrid pays less than other places, for example.

However, before we focus on inheritance tax, we would like to remind you that inheritances are also subject to the municipal capital gains tax or tax on the increase in value of urban land, which is set by the local councils.

Inheritance tax in Madrid

Now it is time to focus on inheritance tax in Madrid. In this regard, the first thing to say is that it is a personal tax, as it is the heir himself who must pay it, and it is progressive, which means that the more valuable the inherited property is, the higher the tax will be.

Specifically, inheritance tax ranges from 7.35% to 34%, depending on the value of the inheritance. The advantage of residing in Madrid is that the autonomous community grants up to 99% of the amount in many cases, which is undoubtedly extremely advantageous for the heirs. However, under certain circumstances.

How much is inheritance tax in Madrid?

As we have just said, inheritance tax in Madrid is reduced by 99% in the case of spouses and direct relatives of the deceased. In other words, they only have to pay 1% of the total. So, for example, if you receive an inheritance valued at 100,000 euros, you will only have to pay 1,000 euros for this tax in order to enjoy it.

Reductions for degree of kinship and disability

However, when determining how much you pay for an inheritance from parents to children in Madrid, you also have to take into account the age of the heirs:

• Descendants under 21 years of age: in this case, there is an additional reduction of 16,000 euros, which is increased by 4,000 euros for each year that the taxpayer is younger, up to a maximum of 48,000 euros.
• Descendants over 21 years of age: in this case, the maximum reduction is set at 16,000 euros.

Second and third degree collateral relatives, as well as ascendants and descendants by affinity (siblings, uncles, nieces, nephews, etc.), enjoy a reduction of 8,000 euros in Madrid. Collateral relatives of the fourth degree (cousins) and even more distant relatives are not entitled to any kind of exemption.

Another issue to take into account is that the heir suffers a certain degree of disability:

Equal or higher than 33 %, up to 65 %: reduction of EUR 55,000.
Equal to or greater than 65 %: up to 153,000 euros.

Inheritance tax liquidation deadline in Madrid

The deadline for inheritance tax liquidation in Madrid is 6 months, counting from the time of death. Another great advantage of inheriting in the capital of Spain is that, even if this period is exceeded, and even if the community claims the payment of this tax, the discount is not lost. In other words, if you pass, you will not have to pay the full state tax.

How to pay inheritance tax in Madrid?

Once the death of the person you are heir to has occurred, go to a Civil Registry office in Madrid and request the death certificate, for which you will have to provide the details of the deceased and, if possible, the family record book.

Next, go to the Registro General de Actos de Última Voluntad (General Register of Last Will and Testament Acts), where you will have to apply for the certificate of last will and testament. This will tell you whether or not the deceased person made a will:

• If he/she did leave a will: then contact the notary's office where he/she deposited it to open it and obtain an authorised copy.
• He or she did not leave a will: in this case, you will need a declaration of heirs, which you can obtain from the notary.

At the notary's office, either the one where the deceased deposited his will or any other, you must request the public deed of declaration of inheritance, which will contain the inventory and valuation of the assets, rights and obligations. Normally, together with this document, the notary will hand over the so-called cuaderno particional after granting the public deed of partition of inheritance.

However, this last document is not compulsory in order to pay inheritance tax in Madrid, as the law specifies that it is sufficient to present a private document agreed between the heirs. It must contain the identification details of all the heirs and an inventory with the valuation of the assets, rights and obligations.

Once you have all the necessary documentation in your possession, you will have to pay the tax. In the Community of Madrid, it is compulsory to do this through the self-assessment system from 1 January 2021, so you will not be able to ask the Administration to calculate the amount for you.

Once you have done so, you can file the inheritance tax self-assessment tax return through the Community of Madrid's electronic office or in person at the offices of the General Tax Department or at any other tax office.

However, you will first have to pay the amount due, which you can do by credit or debit card, bank transfer, direct debit or even Bizum. The choice of the most appropriate method usually depends on the amount to be paid.

Do you still have any questions? If so, please contact our expert inheritance lawyers. They will be happy to help you with whatever you need.