Just as in the other seventeen autonomous communities of Spain, the regional parliament in Galicia is responsible for setting the inheritance tax rates as well as deductions and exemptions that are available to residents there. This follows as a result of the devolution of responsibility from the central government which occurred in 2001 when the entire system of funding was overhauled by the State.
Accordingly, while state rules may apply with regard to matters of inheritance they do so only in the absence of any local laws or to where the relevant individual is not a resident of Galicia. This is determined to be where the person was resident in Galicia over a period of five years before the time of death.
Assuming that the local inheritance tax rules apply, the main initiatives launched by the regional parliament in Santiago de Compostela are contained in law 9/2008, and may be summarised as follows:
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
In Galicia the exemptions available to beneficiaries based on consanguinity are as follows:
Group I Deduction of €1,000,000 plus €100,000 for each year under the age of 21 up to limit of €1.5m
Group II Deduction of €900,000 if under 25 years of age with €100,000less for each year over 21 up to 24. If over 25, a deduction of €18,000
Group III Deduction of €8,000
Group IV No deductions available
Inheritance of Special Awards
For inheritance of special indemnities paid to victims of toxic shock syndrome or victims of terrorism those awards may be reduced by 99%. The reduction applies where such indemnities are not subject to Income Tax.
If the beneficiary is disabled:
If a beneficiary is disabled then they shall be entitled to a deduction of €125,000 where the disability is classified as greater than 33% or €300,000 if greater than 65%. Where the beneficiary is disabled to a degree > 65% and is a member of Group I or II a 100% exemption from inheritance tax applies up to €3m.
Deductions in transfer of Family Business
A tax deduction of 99% of the value of a family business may be deducted from any inheritance tax liability according to the following rules:
- The participation of the deceased in the business must have been at least 50% either individually or jointly with family members.
- The ownership requirement falls to 5% individually and 20% jointly if ‘Reduced Size Company’
- The business may not be sold for a period of no less than 5 years
- The registered address of the company must remain in Galicia for a period of 5 years
Inheritance of the Family Home
A tax deduction is available on the value of the family home up to the value of €600,000 according to the following bands:
Up to €150,000 – 99%
Up to €300,000 – 97%
Over €300,000 – 95%
However, where the family home is inherited by the spouse then the exemption is 100% up to a limit of €600,000
The home may not be sold for a period of 5 years following the inheritance or the deduction is forfeited unless the proceeds are used to purchase a new family home in Galicia.
More distant relatives may also benefit from this exemption but must be over the age of 65 and have been living with the deceased in the property for a period of at least two years prior to the date of death.
As a general rule the following deductions may be made on any estate:
- Funeral Expenses
- Final Medical Expenses of the Deceased
Debts held be the deceased that are evidenced by public documents e. g. a mortgage
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