Madrid Inheritance Tax. Reductions and Bonifications.

Introduction

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 Madrid region, the Inheritance and Donation Tax is regulated and adapted by the regional law Decreto Legislativo 1/2010, de 21 de octubre, del Consejo de Gobierno, por el que se aprueba el Texto Refundido de las Disposiciones Legales de la Comunidad de Madrid en materia de tributos cedidos por el Estado.

In this section we will detail exclusively  reductions, tax rate and bonus  on the Inheriance and Donation Madrid  tax. 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. 

Successions

Reductions in the tax base

Reduction for Kinship

Group I: Acquisitions by descendants (children, grandchildren,…) and adopted persons of twenty-one years, €16,000, plus €4,000 for each year less than twenty-one that the successor in title has, without the reduction being able to exceed €48,000.

Group II: Acquisitions by descendants (children, grandchildren, etc.) and adoptees aged twenty-one or over, spouse, ascendants (parents, grandparents,…) and adoptive parents, €16,000.

Group III: Acquisitions by second and third degree collateral relatives (siblings, nephews), ascendants and descendants by affinity, €8,000.

Group IV: In acquisitions by fourth-degree collaterals, more distant and stranger degrees, there will be no room for reduction.

Reduction for Disability

–  €55,000 for disabled people with a degree of disability equal to or greater than33 per 100, in accordance with the relevant regulations.

– The reduction will be €153,000 for those people who can prove a degree of disability equal to or greater than65 per 100.

Reduction for Life Insurance

A reduction of the 100 per 100 with a limit of €9,200, to the amounts received by the beneficiaries of life insurance contracts, when their relationship with the deceased contracting party is the spouse, ascendant, descendant, adoptive or adopted.

The reduction will be unique per taxable person, regardless of the number of life insurance contracts of which the beneficiary is the beneficiary.

Reduction for main residence

In cases in which the taxable base of an inheritance corresponding to the spouse, ascendants (parents, grandparents…) or descendants (children, grandchildren…) of the deceased, or collateral relative (sibling…) over sixty-five years of age who had lived with the deceased during the two years prior to the death, includes the habitual residence of the deceased, a reduction of the 95% on the net value of the property that goes to the inheritance, with a limit of €123,000 for each taxable person, provided that the acquisition is maintained, for the following five years upon the death of the deceased, unless the purchaser dies within this period.Source

In cases in which the taxable base of an inheritance that corresponds to the spouse, descendants (children, grandchildren…)  or adopted by the deceased person, including the value of a sole proprietorship, professional business or shares in entities to which the exemption regulated in article 4.8 of the Wealth Tax Law applies, or usufruct rights over them, a reduction of 95 per cent will be appliedof the aforementioned net value, provided that the acquisition is maintained, during the five years following the death of the deceased unless the purchaser dies within this period.

When there are no descendants or adoptees, the reduction will be applied to acquisitions by ascendants (parents, grandparents, etc.), adoptive parents and collaterals, up to the third degree (siblings, etc.) and with the same requirements as above. In any case, the surviving spouse will be entitled to the 95 per cent reduction.

Other reductions

– Reduction for historical heritage assets

– Reductions due to toxic syndrome

– Abatements for acts of terrorism

Tax Rate

 Quota

 Tax rebates / bonifications

Kinship Groups I and II

99 per cent rebate on the Inheritance Tax quota.

Kinship Group III

Bonus of the 25% of the tax liability.

Donations

Reduction Kinship Groups I and II

99 per cent discount on the tax liability derived from them.

It will be a necessary requirement for the application of this discount that the donation is formalized in a public document.

When the donation is in cash or in any of the assets or rights contemplated in Article 12 of Law 19/1991, of 6 June, on Wealth Tax, the rebate will only be applicable when the origin of the donated funds is duly justified, provided that, in addition, the origin of said funds has been stated in the public document in which the transfer is formalised.

De facto unions

For the purposes of the application of the provisions of this article, members of de facto unions who meet the requirements established in Law 11/2001, of 19 December, on De Facto Unions of the Community of Madrid, will be assimilated to spouses.