Weighing wealth and inheritance tax against where you would rather live

Key rules

• Residence decides: The region that taxes you follows where you actually live, not where you would prefer to be taxed.
• Wealth tax date: For wealth tax, the region where you are resident on 31 December applies.
• Solidarity tax: Spain's solidarity tax on large fortunes applies to net wealth above 3 million euros.
• National inheritance rates: Without a regional bonus, national inheritance tax rates range from 7.65 to 34 percent.
• Gifts: Gifts of property follow the property's region; other gifts follow where the person receiving them lives.

You cannot choose a region for tax

Your region is set by where you actually live, not by preference. For income tax, you are taxed by the region where you spent the most days in the tax year, and that region's rules apply for the whole year. Temporary absences still count as days there.

If the days cannot settle it, the region with your main centre of interests applies. That is where most of your income comes from. After that comes the region of your last tax return. Your own residence decides which region's rules apply to you, and your spouse's is worked out separately. Only young children who depend on you normally follow the parent they live with. Keeping the family home in your old region can still be used as evidence against a move.

Wealth tax uses the same idea, but the region is the one where you are resident on 31 December.

Wealth tax: some regions charge it, others cancel it

Spain has a national tax on net wealth, and regions can reduce it with a bonus. The big fortunes tax that sits on top of it is covered elsewhere on this page, so the regional bonus is what matters for the choice of where to live.

• Regions that effectively cancel it with a 100% bonus include Madrid, Andalucía, Galicia, Baleares, Murcia and Castilla y León. Cantabria, La Rioja and Extremadura have bonuses of varying size.
• Regions that charge it in practice include Cataluña, Asturias, Aragón, Comunidad Valenciana, Castilla-La Mancha and Canarias. Some set their own exempt minimum, and a few set it lower than the national 700,000 euros, for example 500,000 euros in Comunidad Valenciana. Scales in Cataluña and Aragón go up to 3.5%.

Which regions apply bonuses changes from year to year, so confirm the current list for the tax year with the regional tax office.

Inheritance tax: the allowances decide

Without a regional bonus, national rates of 7.65 to 34 percent apply. Close family (spouse, children, parents) get the largest reductions, and regions change them a lot.

• Madrid: a 99% bonus on the tax for spouse, children and parents, on top of the national allowance. The tax is almost nil.
• Andalucía: a 99% bonus for close family, on estates up to roughly 1 million euros per heir. Amounts above that are taxed normally.
• Cataluña: its own scale, with rates of 7% to 32%. Children under 21 get an allowance of 100,000 euros plus 12,000 per year under 21. Spouses and other close heirs get 100,000 euros. Spouses and children pay low effective tax.
• Comunidad Valenciana: a 100,000 euro allowance for spouse and descendants, more for minors, plus a 75% bonus for close family.
• Canarias: a 99.9% bonus for close family, so tax is practically nil.

The national baseline allowance for a spouse or child is 15,956.87 euros, plus 3,990.72 euros for each year under 21, up to 47,858.59 euros. Regions change their figures often, so check the exact amounts for the year of death.

Which region applies when someone dies

If the person who died lived in Spain, the region where they were habitually resident applies. That means where they spent most days of the last five years. Each heir pays under that region's rules.

If the person who died was not resident, Spanish property is taxed under the region where it is located. Heirs who live in the EU or EEA can generally use the regional rules of the region where the property or most of the assets are. Heirs outside the EU may be limited to the national rules. Cross-border cases are complex, so get advice from a Spanish tax adviser.

Gifts from parents to children

Gifts follow a similar pattern, but the region depends on the asset. For property in Spain, the region where it is located applies. For other assets, such as money, the region where the person receiving the gift lives applies.

• Madrid: a 99% bonus for gifts from parents to children.
• Andalucía: a 99% bonus up to about 1 million euros. The gift must be put in a public deed within 3 months.
• Comunidad Valenciana: a 75% bonus, with limits for gifts of money.
• Cataluña: its own scale, with rates of 5% to 9% for children and a deed required.
• Canarias: a 99.9% bonus up to a cap.

Gift rules should be confirmed with the regional tax office before you give or receive anything.

How to use this when choosing where to live

Compare regions on all the taxes together, not on one. Then remember that the tax follows the place where you really live. Count your days carefully, since the region with the most days decides your income tax for the whole year. Before you commit to a region, ask a Spanish tax adviser to run your own figures for the current year.

Frequently asked questions

Can I pick the region with the lowest wealth tax?

Not by preference. Wealth tax follows the region where you are resident on 31 December. Residence there is set by where you spent the most days of the year, so you would need to genuinely live there.

Which region's inheritance rules apply if I die in Spain?

If you are resident in Spain, the rules of the region where you lived most days of the last five years apply, and each heir pays under them. Spanish property of a non-resident is taxed under the region where the property is. Heirs or owners resident in the EU or EEA can use that region's rules too.

How do inheritance reductions for a spouse or children compare across regions?

Madrid gives a 99% bonus for spouse, children and parents. Andalusia gives a 99% bonus, applying to estates up to roughly 1 million euros per heir. The Canaries give a 99.9% bonus, so tax is practically nil. Valencia gives a 75% bonus, and Catalonia uses its own scale with rates of 7% to 32%.

Do gifts from parents to children get the same treatment?

Often, yes. Madrid gives a 99% bonus on gifts to children, and Andalusia does too up to a threshold, with the gift put in a public deed within 3 months. Valencia gives 75%, and Catalonia has its own scale with a deed required.