Living Abroad, Inheriting in Spain: Do You Have to Pay Taxes Twice?

Spanish Inheritance Tax: When and What

First, recap: Spain charges inheritance tax (Impuesto sobre Sucesiones y Donaciones) on:

• Assets located in Spain, if the heir or beneficiary is non-resident.
  
  

• Additionally, if the heir is a resident of Spain, they owe Spanish tax on worldwide inherited assets (with credits for foreign taxes possibly).
  
  

So, if you live abroad and inherit Spanish property or assets:

• You will owe Spanish inheritance tax on those Spanish assets (unless an exemption or near-100% regional reduction applies, which often it does if you’re close kin as we discussed).
  
  

• If you live in a country that also taxes inheritance (either by taxing you on receiving it or taxing the estate), then that country could impose its own tax too.
  
  

The question of “double tax” comes if both Spain and your home country tax the same asset or transfer.

Spain has only a few inheritance tax treaties to prevent double tax:

• With France, Sweden, Greece, and somewhat with Austria (though Austria repealed inheritance tax so moot).
  
  

• These treaties often allocate taxing rights: e.g., France-Spain treaty says property in one country only taxed there, and the other country gives exemption for it.
  
  

• If you’re in one of those countries, good news: the treaty should ensure you’re not taxed twice. For instance, a French resident inheriting Spanish assets would, under the treaty, pay Spain for Spanish property and France would exempt or credit that, effectively avoiding double taxation.
  
  

If you’re in a country with no treaty with Spain (like UK, Germany, USA, etc.), we rely on domestic laws of each country:

• Spain’s stance: Spain will tax the Spanish assets. Spain does offer a unilateral credit if you (as a Spanish resident heir) paid foreign tax on an inheritance, to avoid double tax, but here you’re a foreign resident heir paying Spanish tax, so the onus is on your country to give credit for Spanish tax (since Spain can’t unilaterally decide foreign tax).
  
  

• Your country’s stance: Many countries have provisions to avoid double taxation on inheritances either by granting a tax credit for foreign inheritance taxes paid or by excluding foreign assets from their tax base.
  
  

Let’s look at some cases:

Case 1: UK resident inherits Spanish assets.

• The UK doesn’t have inheritance tax on recipients; it taxes the estate of the deceased if the deceased was UK domiciled. If the deceased was UK-domiciled, HMRC looks at worldwide assets including the Spanish property.
  
  

• Spain taxes the heir on the Spanish property.
  
  

• Without a treaty, what happens? The UK will calculate IHT on the whole estate (including Spain property). You, as executor or heir, must pay UK IHT.
  
  

• However, the UK has a unilateral relief: If the same assets were taxed abroad (Spain), HMRC allows a deduction of the foreign tax against UK tax on those assets (up to UK tax amount). So effectively, you should not have to pay full Spanish + full UK on the property; the Spanish tax can be credited.
  
  

• Example: Spanish villa taxed €20k by Spain. UK IHT on that villa might be £30k. The UK would let you offset the €20k (converted to £) from the £30k, so you only pay the difference £10k to the UK. (If Spanish tax exceeds UK tax on it, maybe UK would cap the credit at its £30k and you’d have paid a bit more to Spain than UK would have – but at least not taxed twice fully).
  
  

• If the deceased was not UK-domiciled (and UK assets weren’t taxed in UK), then only Spanish tax applies and UK doesn’t tax at all, so no double taxation anyway.
  
  

Case 2: US resident inherits Spanish assets.

• The US doesn’t tax inheritances as income. It has an estate tax but only on the US estate of US persons (and on US-situs assets of foreigners, but not foreign-situs assets of foreigners).
  
  

• If a US person inherits from someone, the US doesn’t impose any tax on the receipt.
  
  

• Thus, you’d only pay Spanish inheritance tax, and no US tax. No double tax at all. (If the deceased was a US citizen, the US estate might owe estate tax on the Spanish asset, but then the estate could possibly deduct Spanish tax under IRS rules. The US does have some estate tax treaties but not with Spain for estate tax, but typically foreign death taxes on foreign property might be creditable on the US estate tax return).
  
  

• So for an American heir, basically only Spanish tax. The US would want you to report if you bring a large amount of money back, but no tax on it. You might have to file an FBAR if you now own a Spanish bank account or share of property, but that’s unrelated to paying tax.
  
  

Case 3: German resident inherits Spanish assets.

• Germany taxes inheritance on the beneficiary (with large allowances for close relatives).
  
  

• No treaty with Spain for inheritance tax (though there is one for gift/estate between West Germany and Spain from 1966, I think it’s outdated or not applicable to current autonomous region differences, we should check PWC: not listed as having an IHT treaty, probably none).
  
  

• Germany does grant credit for foreign inheritance taxes if a foreign asset is taxed by both. German law says if you, as a German taxpayer, paid a foreign inheritance tax on an asset, you can credit it against German tax for that asset up to German tax amount. This avoids double tax.
  
  

• So a German inheriting a Costa del Sol house: Spain taxes maybe a small amount (depending on heir relation and region). Germany will also tax (Germany has classes and allowances). But Germany should credit the Spanish tax.
  
  

• If one country’s tax is higher, usually you end up paying the higher one in total.
  
  

• If both countries have progressive rates, sometimes one tax can push you into a bracket, then the other taxes similarly. But typically credit solves the duplication.
  
  

Case 4: Living in a country with no inheritance tax.

• Many countries simply won’t tax you at all on inheritance (e.g., Australia, New Zealand, Canada, to some extent). In that case, only Spain taxes it. No double taxation because the other country has no tax on it. You might just have to declare it if required (like in some countries, large gifts/inheritances might have to be reported for money laundering regulations, but not taxed).
  
  

• For example, an Australian inherits Spanish real estate: Spain taxes (if any tax due after allowances), Australia has no inheritance tax, so done. However, later if they sell the property, Australian capital gains tax might apply on that sale (with a cost base as value at inheritance if applicable under Aussie rules – outside the scope here).
  
  

What about wealth tax?

• If you inherit significant assets in Spain and you’re not a resident, Spain’s wealth tax doesn’t apply to non-residents unless they own assets in Spain above certain thresholds (non-residents pay wealth tax only on Spanish assets, with lower allowance than residents in some cases). If the property is over €700k in net value (depending on region, some regions have wealth tax abolished for residents but not for non-residents), you might owe yearly wealth tax as a non-resident asset holder. That’s not exactly “double taxation” in inheritance, but a new tax obligation due to owning an expensive asset in Spain.
  
  

• If you reside abroad in a place like Switzerland or some that have wealth tax, both countries might want to tax the same asset annually. Some treaties might address wealth tax.
  
  

Double Tax Relief Mechanisms:

1. Tax Treaties: If in France, Sweden, Greece – those should prevent double tax. For UK, USA, etc., no treaty, use credits.
   
   

2. Unilateral Credit: As described, your country may allow deduction of Spanish tax. Check local tax law or speak to a tax advisor.
   
   

3. Exemptions by Category: Some countries exempt foreign real estate from their inheritance tax to encourage keeping capital at home or due to constitutional reasons. For instance, Spain for Spanish residents: if a Spanish resident inherits foreign property and gets taxed abroad for it, Spain lets a credit. Similarly, some countries might not tax foreign property if foreign tax was paid. Each country differs.
   
   

Important: To claim a foreign tax credit, you’ll need documentation: proof of the Spanish tax paid (receipts, official assessments, etc.), translated possibly. Ensure to coordinate with both sets of advisors (Spanish and your home country) so you structure any filings correctly.

Scenario where you might pay two taxes without relief:

• If neither country has a mechanism. But most do. However, consider:
  
  

  • If you inherit from a friend (not relative) in Spain, Spain taxes you heavily (Group IV no reductions). If you live in a country that taxes all inheritances to beneficiaries (like Ireland or South Africa) and doesn’t have a credit for foreign tax, you could get hit twice. This is an area to research specific country laws. Many modern systems do allow foreign tax credit, but if not, double taxation can indeed occur.
    
    

  • Some places have inheritance tax threshold. Imagine: Spain might tax you a small amount (if any) because of allowances, but your home country might tax the whole inheritance above a threshold. Or vice versa. Credits might not fully eliminate double tax if, say, Spanish tax is assessed on one person and foreign tax on another entity. Unlikely though; usually it’s same person being taxed.
    
    

EU Succession vs. Tax: It’s worth noting, EU Regulation 650/2012 deals with which succession law applies (civil law), not taxes. Taxes are not harmonized. So you might see confusion: choosing your national succession law doesn’t exempt you from Spanish tax. Taxes are separate; you can’t choose which country’s tax law applies – both countries may impose tax in parallel. But what you can often rely on is that countries don’t like double tax because it discourages cross-border movement of capital, so often they have relief.

One More Twist – Gift vs Inheritance: If you’re concerned about double inheritance tax, some plan to do gifts while alive, but that can just shift to gift tax (Spain taxes gifts similarly, and some home countries tax gifts too, but maybe differently). That’s outside the immediate “inheritance” scenario but relevant if, say, parents consider gifting Spanish property to kids to avoid future double estate tax. That requires case-by-case analysis (often not needed now because many Spanish regions virtually eliminated inheritance tax for kids/spouse, so dying isn’t taxed, whereas a gift might still be taxed, ironically making inheritance more tax-friendly now in places like Andalusia or Valencia with 99% discounts for inheritances but not for lifetime gifts).

Advice in Summary:

• Check if your home country has inheritance tax at all. If not, focus just on Spanish obligations.
  
  

• If yes, see if Spain has a treaty with it (rare) or if not, what unilateral relief exists.
  
  

• You might want a tax advisor to handle your home country estate/inheritance tax return and ensure Spanish tax is credited.
  
  

• File Spanish inheritance tax timely to get receipts for credit claims.
  
  

• Sometimes, where possible, coordinate the timing: if you can, you might pay Spanish tax first so you have a final figure to report at home. If home country needs to settle first, you might still estimate Spanish tax and claim credit later (some systems allow later adjustments).
  
  

No Paying Twice is the Goal: Usually, thanks to credits or allowances, you will not effectively pay double tax. You might have to pay two authorities, but one will reduce what the other takes. The aim of both national laws and bilateral treaties is to avoid double taxation because it’s seen as unfair and economically detrimental (as PWC notes, Spain’s treaty list is short, but its internal laws provide some relief for residents).

Conclusion

If you live abroad and inherit assets in Spain, you generally shouldn’t end up paying tax twice on the same inheritance. Here’s why:

• Few Countries, Few Treaties: Spain only has inheritance tax treaties with a few nations, but in their absence, most countries offer foreign tax credits or exemptions.
  
  

• Use of Credits: If both Spain and your country levy a tax, you can usually offset one against the other, up to the amount of the smaller tax. Practically, you’ll pay the higher of the two countries’ tax rates in total, not sum of both.
  
  

• No Home Tax: Many heirs find their home country doesn’t tax the inheritance at all (common law countries don’t tax the heir, only the estate of their own domiciliaries). In those cases, only Spanish tax applies – no double tax issue.
  
  

• Plan and Inform: To ensure you don’t pay double, it’s critical to report everything properly and on time in both jurisdictions, and claim the reliefs. Overlooking a credit could lead to double payment unnecessarily.
  
  

So, do you have to pay taxes twice? Probably not – at least not in the full sense. One tax authority’s bill should be reduced by what you paid the other, under either treaty or local law. But every situation can vary, so getting personalized advice is wise, especially for large estates.

To be safe:

• Research your country’s rules or talk to a tax professional there about foreign inheritance.
  
  

• Keep all documents of Spanish tax payments.
  
  

• Meet deadlines in both places (like filing an inheritance tax return in Spain within 6 months, and any home country inheritance/estate tax filings, which could have their own timelines).
  
  

• If a treaty exists (e.g., France), follow its provisions closely (often you’ll choose which country taxes certain assets, then the other exempts).
  
  

• If you suspect double taxation not being relieved, you can sometimes appeal or seek a competent authority agreement between countries, but that’s rarely needed if laws are followed.
  
  

In summary, while it can feel like you’re being hit from all sides, international tax systems typically avert true double taxation on inheritances. The goal is that your inheritance is taxed once (at the highest applicable rate, if two jurisdictions overlap). With proper planning and compliance, you won’t be unjustly paying twice on the same dime.

(Next, we’ll shift focus to expats actually living in Spain and how they can plan their estate for their heirs’ sake – touching on some of these cross-border considerations in another way.)