Property taxation: inheritance

Property taxation: inheritance

 Unfortunately, there will come a time in life when we will lose a loved one. At such difficult moments, commitments accumulate which, due to our emotional state, we do not feel like attending to. For this reason, it is advisable to prepare oneself to have the knowledge and tools to make decisions.

One of the most common mistakes when making the inheritance at the notary's office, when there is a property in the estate, is to declare the minimum tax value, which corresponds to the reference value that can be obtained on the Cadastre's website with a digital certificate. However, if you want to sell the property in order to share the estate, this may be a miscalculation.

Taxes on the real estate profit are calculated as follows: From the gross sales price, the marketing costs and the costs essential to the sale are deducted. These are the estate agent's fees, the certificate of occupancy, the energy efficiency certificate and the municipal capital gains tax. From the net sale price, we deduct the total purchase price, made up of the purchase price, plus taxes, notary, registry and agency fees.


Sales price:                      500'000 €
Agent's fees:                      30'000 €
Certificate of occupancy:        150 €
CEE:                                       150 €
Municipal surplus value:      1'200 €

Net selling price:           468'500 €

Purchase price:               250'000 €
Taxes:                                25'000 €
Notary:                                 1'000 €
Registry office:                       300 €
Gestoría 200 €

Total purchase price:    276'500 €.

Taxable profit: 192'000 € (468'500 € - 276'500 €)

It should be noted that depending on the situation and age of the taxpayer, there may be tax reductions on the taxable profit. But in this case, let's calculate the normal amount which would be €192'000 for a single taxpayer.

The first 6'000 € at 19%                      1'140 €.
from 6'001 to 50'000 € at 21%            9'240 €.
from 50'001 to 192'000 € at 23%      32'660 €

Total:                                                43'040 €

From 200'000 € profit, the tax rate is 26%.

Let us imagine the following practical case:

Three brothers receive a house on the Costa Brava from their deceased father. As each of them has different liquidity needs, they decide that once the inheritance is signed at the notary's office, they will put the house up for sale. To find out the market value of the house, they call an agent in the area who makes a valuation at a price of 450,000 €.

In the first case, the brothers decide to declare the minimum value admitted by the tax authorities, which is the cadastral reference value, in this case an amount of €180,000, which will be considered as the value of the last transfer before the future sale.

As there are three siblings, each one is entitled in Catalonia to an amount of €100,000 exempt from inheritance tax, which means that they do not pay inheritance tax. But at the time of sale, if they achieve the target of €450,000, i.e. €150,000 per brother, the tax agency would consider the real estate gain as the difference between the last transfer and the sale, i.e. €90,000 for each one, taxing €19,580 each.

Let us now see what they would have paid if they declared €450,000, the market value of the house, at the time of inheritance.

Entitled to a reduction for kinship of €100,000, the taxable base for each of them would have been €50,000, which corresponds to the first tax bracket, 7%, i.e. a total tax liability of €3,500. As they are group II taxpayers, they are entitled to a 60% tax credit up to 100,000, which would have left them with a tax liability of €1,400 each.

This is the case for direct descendants and spouses. The situation is totally different for members of relationship groups 3 and 4 who do not benefit from any kind of reduction and are taxed at a much higher rate. In this case it may be more advantageous to declare the minimum tax value at the time of the deed of inheritance.

Therefore, before going to the notary's office, we recommend that you think about the sale of your property and consult a specialist.

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