INHERITANCE TAX IN MADRID. FAST GUIDE

The general framework of inheritance and gift tax in the Community of Madrid derives from Legislative Decree 1/2010, of October 21, of the Governing Council, which approves the consolidated text of the legal provisions of the Community of Madrid in matter of taxes ceded by the state.

The application of this regulation depends that the deceased person had his last habitual residence in the Community of Madrid, as long as the heirs were residents in Spain, regardless of the Autonomous Community.

In the event that the heirs are non-residents in Spain, since it is not possible to treat this matter in two lines, I refer to these two entries in my blog, the first The taxation of inheritances and donations of non-residents in Spain  and the second Inheritance tax and non-EU residents

For those cases in which there has been a change of residence of the deceased, the residence of the place where they have stayed for a greater number of days in the five years prior to the date of accrual is taken into account..

1.- Tax application scheme.

1.1.- TAXABLE BASE.- It starts from the real value of the assets, with deduction of debts and encumbrances, with which the tax base is obtained.

1.2.- LIQUIDABLE BASE. There is a right to a series of reductions on this amount, which gives us the payable basis.

1.3.- TAX RATE AND MULTIPLIER. To the amount thus obtained, a tax rate (progressive depending on the amount of the base) and the amount obtained is applied a multiplier coefficient depending on the relationship between the deceased and the heir and the pre-existing patrimony of the latter.

1.4.- QUOTA BONUS.- Finally, the resulting fee is subsidized by 99 percent when those who inherit are spouses, accredited domestic partners, ascendants or descendants of the deceased person. The application of these bonuses is what determines that for these people the inheritance tax is, in Madrid, practically non-existent.

2.- Development of the settlement scheme.

2.1.- Taxable Base.-   As we have said, it is the real value of the goods. We have already referred to this aspect in other entries of this blog. In the case of real estate, vehicles and boats, the Community of Madrid has an online consultation system on the possible value of the goods.

2.2.- Tax base reductions.

2.2.1.- Reduction due to kinship.

Group I: Acquisitions by descendants and adoptees under the age of twenty-one, 16,000 euros, plus 4,000 euros for each year less than twenty-one that the successor has, without the reduction being able to exceed 48,000 euros.

Group II: Acquisitions by descendants and adoptees aged twenty-one or over, spouses, ascendants and adopters, 16,000 euros.

Group III: Acquisitions by second and third degree collaterals, ascendants and descendants by affinity, 8,000 euros. It is expected that

Group IV: In the acquisitions by fourth degree collaterals, more distant and strange degrees, there will be no reduction.

2.2.2.- Reductions for disability

In addition to those that may correspond depending on the degree of kinship with the deceased, a reduction of 55,000 euros will be applied to disabled people with a degree of disability equal to or greater than 33 percent, in accordance with the scale referred to. Article 148 of the Consolidated Text of the General Social Security Law, approved by Royal Legislative Decree 1/1994, of June 20; The reduction will be 153,000 euros for those people who, in accordance with the aforementioned regulations, prove a degree of disability equal to or greater than 65 percent.

2.2.3.- Domestic partnerships are assimilated to spouses.

Members of de facto unions who meet the requirements established in Law 11/2001, of December 19, on De facto Unions of the Community of Madrid are assimilated to spouses.

2.2.4.- Reductions for life insurance.

A reduction of 100 per 100 is applied, with a limit of 9,200 euros, to the amounts received by the beneficiaries of life insurance contracts when they are related to the deceased contracting party as spouse, ascendant, descendant, adopter or adoptee.

2.2.6.- Reduction for the acquisition of an individual company, a professional business or shares in entities exempt from the Wealth Tax.

A reduction of 95% in the value of such goods can be obtained. Due to its length and complexity, we did not develop it.

2.2.7.-  Reduction for the acquisition of the habitual residence of the deceased.

In acquisitions due to death that correspond to the spouse, descendants, ascendants or or to a collateral relative over the age of sixty-five who had lived with the deceased during the two years prior to the death, of the principal residence of the deceased, a reduction of 95 % of the value of the residence can be applied to the tax base,  with a limit of 123,000 euros for each taxpayer.

2.2.8.- Reduction for the acquisition of assets of the deceased used in the agricultural exploitation of the successor in title.

(Vid of law of July 4, 1995 of modernization of agricultural exploitations)

2.2.9.- Reduction for the acquisition of cultural heritage assets.

2.2.10.- Reduction for decennial superimposition.

2.3.- Tax rate.

2.4.-Multiplying coefficient.

2.5.- The quota bonus.

The taxpayers included in groups I and II, before seen and accredited domestic partners will apply a bonus of 99 per 100 in the tax rate derived from mortis causa acquisitions and amounts received by life insurance beneficiaries that accumulate to the rest of assets and rights that make up the hereditary portion of the beneficiary.

Law 6/2018 of December 19 of the Community of Madrid, has introduced a bonus in the tax quota of 15% for the case of acquisition by second degree collaterals (brothers); and 10% for the case of acquisition by third-degree collaterals (uncles and nephews), conditional on a tax declaration being made within a voluntary term or after the term but without a requirement from the administration. For more information about this bonus, you can consult here.