Basque Country Inheritance Tax. Reductions and Bonifications

Introduction

Bilbao, San Sebastian, and other cities from the historical territories of Biscay, Gipuzkoa, and Alava have not differences in each one of their jurisdictions about inheritance tax. An interested  comparative is created in our report.

The Inheritance and Gift Tax is a state tax. It is regulated by Law 29/1987, of December 18, on the Tax on Inheritance and Gift Taxes and the Regulation that develops it is Royal Decree 1629/1991, of November 8.  But, this national tax can be adapted and improved by regions. So, for Basque Country, the Inheritance and Donation Tax is regulated and adapted by the regional law in each of the three Historic territories in which the region is divided: 

– Vizcaya/Bizcaia/Biscay

Inheritance process and Inheritance Tax are basically regulated by two normatives: 

• DECRETO FORAL de la Diputación Foral de Bizkaia 58/2015, de 21 de abril, por el que se aprueba el Reglamento del Impuesto sobre Sucesiones y Donaciones
• DECRETO FORAL 107/2001, de 5 de junio, por el que se aprueba el Reglamento del Impuesto sobre Sucesiones y Donaciones

– Guipúzcoa/Gipuzkoa

The basic regulation for Inheritance is regulated by the law Norma Foral 2/2022, de 10 de marzo, del lmpuesto
sobre Sucesiones y Donaciones.

– Álava

In the same way, Alava has his own Inheritance process and tax regulations from the law:  Norma Foral 11/2005, de 16 de mayo, del Impuesto sobre Sucesiones y Donaciones. 

In this section we will detail exclusively  reductions, tax rate and bonus  on the Inheritance and Donation in the 3 provinces/territories from Basque Country in relation to  tax advantages and reductions. For other aspects as Process of Inheritance, Executing a foreign Will etc, please, visit our Inheritance Process section, where all aspects and procedures may be reproduced in inheritance process independently of the specific executed region. 

Differences in Inheritance Tax treatment in the 3 provinces Vizcaya (Bizkaia)m Álava and Gipuzkoa

Inheritance Tax in the Basque Country presents significant differences between the provinces of Vizcaya (Bizkaia), Álava and Gipuzkoa.

Although there are no direct deductions in any of the three territories, many of the applicable reductions are quite similar.

Main variations are in the rates that are applied to the taxable base.

It is important to emphasise that, despite these similarities, the treatment of Inheritance Tax in Vizcaya differs in some key aspects with respect to Álava and Gipuzkoa.

Deductions do not exist in any of the three cases, and although reductions are common in many points, there are nuances in the rates according to each province.

Who must pay Inheritance Tax?

Inheritance Tax is a direct tax that must be paid by individuals when there is a free transfer of assets or rights, whether by inheritance, donation or insurance.

This tax is applied to the increase in wealth that a person experiences after receiving an asset, and its amount varies according to the value of the assets received and the amount of money involved. Cases in which it is necessary to pay this tax include:

• When receiving an inheritance after the death of a person.
• When you are a beneficiary of life insurance due to death.
• In the case of receiving a living donation.

This tax must be filed in the province of the Basque Country where the deceased had his or her habitual residence.

How to calculate the amount to be paid for an inheritance in the Basque Country?

Given that there are no deductions in this community, the amount to be paid for Inheritance Tax is calculated by applying the corresponding rate and the relevant reductions on the taxable base.

Taxable base

The taxable base includes the total value of the inherited assets and rights, discounting debts, charges and deductible expenses.

Once this value has been determined, specific reductions and rates are applied according to the province where it is taxed and the degree of relationship with the deceased.

Reductions in the tax base

The reductions depend, for the most part, on the degree of kinship with the deceased. Although some reductions are common in the three provinces, there are also particularities in each territory.

Reduction for kinship

In all provinces of the Basque Country, the next of kin can benefit from significant exemptions if the value of the assets does not exceed certain thresholds. These reductions are:

• Group I (spouse, common-law partner, descendants or ascendants in the direct line): Reduction of €400,000.
• Group II (second-degree relatives): €40,000 in Álava and Vizcaya, and €16,150 in Gipuzkoa.
• Group III (third-degree collateral): €20,000 in Vizcaya, without reduction in Álava and €8,075 in Gipuzkoa.
• Group IV (fourth-degree collaterals and unrelated persons): There is no reduction in any territory.

Reduction for life insurance:

• In Vizcaya, reductions for being a beneficiary of life insurance are applied according to the relationship with the deceased:
  • Group I: €400,000.
  • Group II: 50% of the value of the insurance, with a limit of €200,000.
  • Groups III and IV: 10% of the value of the insurance, with a limit of €40,000.
• In Álava and Gipuzkoa, the reductions are the same as those established by the degree of kinship.

Disability reduction:

• In Gipuzkoa, heirs with disabilities can apply an additional reduction of €80,000.
• In Vizcaya, the reduction is €100,000. In Álava, the reductions depend on the degree of disability:
  • Degree of disability between 33% and 65%: Reduction of €56,109.
  • Degree of disability greater than or equal to 65% or situation of dependency: Reduction of €176,045. It should be noted that in Álava, Group I heirs (spouse, common-law partner, descendants or direct ascendants) do not benefit from this reduction.

Reduction for habitual residence: In all Basque provinces, the reduction for the transfer of the main residence is 95%. However, the limit of the reduction varies:

• • In Vizcaya and Álava, the limit is €212,242.
  • In Gipuzkoa, the limit is €207,122.

Other reductions: Depending on the territory, there are also specific reductions in cases related to agricultural or forestry activities, such as the acquisition of land to complete agricultural holdings or areas dedicated to forestry.

Taxable base and fees

After applying the reductions to the taxable base, the taxable base is obtained. On this basis, the corresponding rates are applied to calculate the final tax liability.

Rates in the Basque Country vary according to the taxable base and the degree of kinship of the heir, so it is essential to take into account both the value of the assets and the link with the deceased to determine the amount to be paid.

Bizkaia Tariff

• Group I. For spouse or common-law partner, descendants or ascendants in the direct line by consanguinity with an amount greater than €400,000. The rate will be 1.5%
• Second-degree collaterals, third-degree collaterals by consanguinity, ascendants and descendants by affinity, the following applies:

• For fourth-degree, second-degree, and third-degree affinity transmissions, more distant collaterals, or strangers:

Alava Tax Rate

In the case of Álava, we differentiate between three types of tariffs.

In addition to 1.5% for Group I (spouse or common-law partner, descendants or ascendants in the direct line by consanguinity)

For people with disabilities:

Fee for collateral transmissions of the second and third degree of consanguinity, as well as ascendants and descendants by affinity:

And finally, the rate for collaterals of the fourth degree, second and third degree by affinity, collaterals of higher degrees or strangers:

Gipuzkoa Rate

Here two different rates are differentiated. Firstly, for

• Groups I and II

• Groups III and IV

 Tax to pay

As we have mentioned, there are no possible deductions in this autonomous community, so the amount to be paid will be the result of applying the above rates to the taxable base.