May I ask for deferral of Inheritance Tax?

[Kate]

My farther died intestate, so as far as I know, personal law rules applies in relation to disposition of his assets. But under our law, we can provide this (Certificado de Ley) only after 6 months period. Will we still be subject to penalties for late payment in Spain? How can we avoid this?

[Lawbird Lawyer]

Dear Kate,

Yes, you can request a deferral and/or to fraction payment of the tax up to 5 years.

More details in my article:

Spanish Inheritance Tax: Advantages of Making a Will in Spain - 3rd September 2009

Excerpt:

2. Drawing up a Spanish will saves taxes to your heirs. There’s a deadline of 6 months as from the time of the testator’s demise to file and pay Spanish Inheritance Tax. You can request a deferral within the first five months of the death, but heirs may still have to pay the penalty and/or delay interests depending on how late they actually pay. You can also request to fraction the IHT paying in instalments up to five years. After the six months deadline has elapsed your beneficiaries will incur in penalties for late payment typically ranging from 5%, 10% and 15% if paid in the next 3, 6 and 12 months as from the said deadline. If payment is made after 12 months from the deadline a surcharge of 20% is applied besides the accrued delay interests. Bear in mind that deposit monies will be frozen upon death.

A Spanish will has the advantage that it can be executed almost immediately whereas a UK or Irish one will no doubt exceed the deadline attracting the penalties from the Spanish Tax Office for late payment. The reason is that a Grant of Probate must be followed in your home country which takes a long time and besides is fairly expensive. It is usual that foreign wills take in excess of a year or more to be executed in Spain which translates into higher expenses borne by your beneficiaries due to the surcharge for late payment explained above.

Yours sincerely,
Raymundo LarraÃ*n Nesbitt