Inheritance tax in Spain for non-resident heirs: full 2026 guide

When Spanish ISD applies

Spanish ISD applies in two situations: (a) the deceased was Spanish fiscal resident — worldwide assets are taxed in Spain, (b) the deceased was non-resident but owned property in Spain — only the Spanish assets are taxed in Spain. For non-resident property owners, situation (b) is the relevant one.

The territorial law that applies depends on where the asset is located, not where the heir lives. A Madrid property inherited by a UK son triggers Madrid's regional rules; a Mallorca property inherited by the same UK son triggers Balearic rules. The same heir can face different rates for different properties.

After death, the heir must file Modelo 650 within 6 months. The 6-month clock starts on the date of death. A formal extension request (within the first 5 months) gives an extra 6 months. Interest accrues during the extension at the legal rate.

Regional variation — why it matters enormously

Spain's 17 autonomous regions have wide discretion over inheritance tax. The state law sets a baseline (Ley 29/1987) but each region can apply 'bonificaciones' (reductions) on the resulting tax. Direct heirs (spouses, children, grandchildren, parents) are often heavily favoured:

Kinship groups and reductions

Spanish ISD divides heirs into four kinship groups, with sliding allowances and reductions for closer relatives:

Group I: descendants under 21 — highest allowance (typically €15,956 + €3,990 per year under 21).

Group II: descendants 21+, spouses, ascendants — allowance €15,956 (modifiable by region).

Group III: collateral relatives (siblings, uncles/aunts, nephews) — allowance €7,993.

Group IV: distant relatives and unrelated — no kinship allowance.

On top of kinship allowances, common deductions: 95% reduction for family business / dwelling, primary-residence reduction (up to €122,606 with 10-year retention), disability reduction (€47,858-€150,253 depending on degree), life insurance reductions (€9,195).