Inheritance Tax in Spain by Region

One country, seventeen inheritance taxes

The Impuesto sobre Sucesiones y Donaciones, the ISD, is set nationally but handed to the comunidades autónomas to run. Each region can add its own reductions, its own discounts on the final tax, and its own rules about who qualifies. Over the last decade this turned into open competition. Madrid and Andalucía led a race to cut the tax on close family to almost zero, and several regions followed. Others held back. The result is that the deceased person's address, and to a lesser extent where the property sits, quietly decides how much of the estate reaches the family. It feels arbitrary, and in a sense it is, but it is the single most important fact about inheritance tax in Spain.

The state rules everyone starts from

Before any regional discount applies, the national framework sets the shape of the tax. It sorts heirs into four groups by closeness. Group I is children under 21. Group II is children of 21 and over, spouses and parents. Group III is siblings, aunts, uncles, nephews and nieces. Group IV is cousins and everyone more distant. The state gives Group II a reduction of just under 16,000 euros, with more for younger children, nothing for Group IV, and then applies a rising scale from 7.65% up to 34%. On top of that sit multiplier coefficients that increase the bill for distant relatives and for heirs who are already wealthy. If a region offered nothing extra, these are the numbers you would pay. Very few close relatives ever do, because the regions have layered their own relief on top.

Andalucía: the million euro shield

Andalucía is the clearest example of how far a region will go. For Groups I and II, close family, it applies a reduction of up to one million euros per heir before any tax is calculated. In plain terms, a son or daughter inheriting 200,000 euros, or even 800,000 euros, from a parent reaches a taxable base of zero on that allowance alone, and pays nothing. Above the million, Andalucía then applies a 99% discount on whatever tax would remain, with no upper limit, so even large estates are heavily protected. There are further improved reductions for a family business or a main home passing to close relatives. The one group that does not get this treatment is Group III. Siblings, nephews and nieces get a 250,000 euro reduction instead, and they do not receive the 99% discount, so a brother inheriting from a brother can still face a meaningful bill.

Madrid: 99% off, and now a break for siblings too

Madrid took a slightly different route to a similar result. For Groups I and II it applies a 99% discount, a bonificación, directly on the tax due, so close family pay just 1% of what the national scale would charge. On a typical family home that turns a serious tax into a token amount. What is newer is the treatment of Group III. Under a 2025 reform, Madrid raised the discount for siblings, nephews, nieces, aunts and uncles to 50% with effect from the middle of that year, so that even the wider family now gets real relief where before they got very little. Madrid does attach a condition worth knowing: to use the regional benefit, the person who died generally needs to have had their main home in Madrid for most of the five years before death. It is not enough to simply own a flat in the capital.

The regions where it still bites, and the ones that abolished it

It would be wrong to suggest the whole country has cut inheritance tax to nothing. The picture is patchy and it keeps moving. La Rioja applies a 99% discount for close family and, after a 2024 change, removed the ceiling that used to cap it. Extremadura, Murcia and the Valencian Community sit in similar territory for Groups I and II, and Valencia has been extending relief to Group III in stages. Cantabria and the Balearic Islands have pushed close family relief close to total. At the other end, some regions have historically kept a real tax on larger estates and on anyone beyond the closest family. Because these rules change with each regional budget, the safe approach is to check the position in the specific region at the time of death rather than rely on what was true a year ago. This is one area where last year's advice can be genuinely wrong.

The rule that changed everything for non residents

For a long time there was a sting in all of this for foreign families. If the heir or the deceased lived outside Spain, the regional discounts were denied and the harsher national rules applied instead. That produced absurd outcomes where a Dutch or German family inheriting a Spanish holiday home paid many times what a Spanish neighbour would. The Court of Justice of the European Union ruled this discrimination unlawful in 2014, the Spanish Supreme Court later extended the same protection to residents of countries outside the EU, and Ley 11/2021 finally wrote it into national law. Today a non resident heir can apply the regional reductions and discounts on Spanish assets just as a resident would. For a non resident, the relevant region is generally the one where the most valuable Spanish assets are located. There is a practical step attached: non residents need to appoint a representative in Spain to handle the filing with the Agencia Tributaria. And anyone who inherited in the years before the rules were fixed, and paid under the old state only regime, may still be able to reclaim the overpayment.

What this means if you own a home here

If you own property in Spain, the lesson is not to assume the worst or the best, but to find out where your estate would connect and to plan around it. A clear Spanish will keeps everything moving inside the six month filing window and avoids the scramble that pushes families into rushed decisions. Take the time now, while the options are still open, to understand your region and get your paperwork in order.