Spanish Inheritance & Gift Tax: Life Insurance, Gifts, Non-Residents

Life Insurance Taxation in Spain

When heirs receive compensation from a decedent's life insurance policy, this amount must be added to the tax base for Inheritance Tax purposes.

The taxable event occurs when beneficiaries perceive mortis causa amounts from a life insurance policy where the policyholder is someone other than the beneficiary.

• Vesting: Occurs upon the insured's death.
• Taxpayer: The beneficiary of the life insurance, if an individual (corporate entities would be subject to Corporate Income Tax).
• Tax Base: The amount received by the beneficiary, which is added to the rest of the hereditary portion.
• Base Reductions: Implemented reductions include those for common kinship and a 100% reduction (with an upper limit) if the beneficiary is a spouse, ancestor, or descendant.

Spanish Gift Tax: Key Regulations

Although regulated by law with common standards, the Gift Tax has its own autonomy.

The taxable event is the acquisition of property or rights due to a gratuitous inter vivos transfer (gift) provided by an individual. Donations made by legal entities are taxed under Corporate Income Tax.

• Taxpayer: The donee, or the individual favored by the gratuitous transfer.
• Vesting: Occurs on the day the act or transaction causing the gift takes place, typically the date of the Deed of Donation. There is a specific deadline for self-assessment in the Gift Tax.
• Tax Base: The net value, i.e., the real value of assets minus debts and charges.
• Allowable Charges (Art. 16): Include taxes levied on the property, such as pensions or censuses.
• Deductible Debts (Art. 17): Are those secured by property rights on the same property, excluding mortgages or pledges.

Under ordinary state law, the tax basis coincides with the tax base.

Non-Resident Taxation: Real Obligation in Spain

The "Real Obligation to Contribute" refers to the taxation of non-residents in Spanish territory regarding certain assets.

The key aspect of this regime is not the origin of the acquisition, but that the recipient of the assets is a non-resident in Spain. For example, if a daughter living in Paris (whose parents are Spanish and French) inherits a flat in Valencia from her Spanish father, she would be subject to this regime.

Peculiarities of Non-Resident Taxation:

The taxable event is the concurrence of three circumstances:

1. The acquisition of property located in Spanish territory.
2. By way of inheritance or gift.
3. For an individual who is not ordinarily resident in Spanish territory.

Additional points:

• Base reductions, such as those for common kinship, life insurance, and residence, will apply.
• The state's tariff rates and multipliers are applied.
• There is no deduction for international double taxation.
• Spanish autonomous regions have no jurisdiction over the "Real Obligation to Contribute" for these two taxes (Inheritance and Gift Tax).