Retrieved from Friday 21 July 2023 Valencian government announced to significantly reduce inheritance tax and gift tax with retroactive effect. This makes donating in Costa Blanca considerably more interesting.
99% reduction of tax payable
Specifically, there will be a 99% per cent reduction in inheritance and gift tax for direct line heirs and beneficiaries. Think parents, spouses and children. This is similar to the regulations in Andalusia.
Entry into force
The aim is for the reduction to take effect retrospectively from 28 May 2023.
Impact of reduced inheritance and gift tax
The legislation has not yet been voted on, but based on the press release, this reduction means that there will be an elimination of (or negligible) inheritance and gift tax for owners of residence in Costa Blanca.
In case of an inheritance with Spanish property will continue to be subject to Flemish inheritance tax for testators living in Flanders. The heirs will then still pay Flemish inheritance tax on the property in Spain. Spanish inheritance tax becomes negligible.
Find more information on Flemish inheritance tax returns with Spanish property here.
In case of a donation of Spanish property, there is no Flemish inheritance tax, nor Flemish gift tax. Spanish gift tax is reduced by 99% for direct line beneficiaries. In addition to the gift tax, there is still a possible Spanish capital gains tax to pay, but if you donate soon enough after purchase, this tax too is negligible. This means that gifting your second residence in Spain becomes particularly interesting.
Find more information on gifting in Spain here.
Note: this information was based on the press release of 21 July 2023. Effective legislation may contain other elements.
