Assets of non-residents in Spain are subject to inheritance tax on death. The rules are complicated and it is not possible to generalise on the rate of the tax as this depends on individual circumstances.

As a non-resident, with assets in Spain, these can be distributed in accordance with the laws of the country of which you are a national. In effect this means that you can distribute the estate through your Spanish Will in whatever way you wish provided it accords with the law of your nationality.

It is advisable to make a separate Spanish Will dealing with your assets in Spain and if you have not already done so, we will be glad to assist. It is also important to remember that if you have made a Will in your home country, you should make your lawyer aware of the existence of the Spanish Will in order he or she can ensure that the contents are not in conflict or that your English Will has not inadvertently revoked your Spanish Will.

For Spanish citizens and, in some circumstances, those who are resident in Spain, on death, their estate passes subject to the laws of forced heirship. Also their worldwide assets are, subject to what is said below, included for the purposes of inheritance tax in Spain.

For those who are resident or contemplating residency in Spain, there have been significant changes in the law in certain parts of the country, and more is proposed all with a view to the reduction or abolition of inheritance tax.

The Regional Government of Andalucia have produced some radical changes for those tax resident in the Region when the beneficiaries are relatives such as a spouse, children or parents, which may mean no inheritance tax is payable. To be eligible, each of the above beneficiaries (who must be resident in Andalucia and registered at the Town Hall) should be receiving less than €125,000 from the estate and have existing wealth of less than €402,000.

Further reductions refer to the "habitual residence" of the deceased when the beneficiaries are the spouse, parents or an uncle or cousin (the latter being over 65 years of age and having lived in the house for 2 years prior the death). If so there is a 99.99% reduction provided the beneficiary keeps the house for at least 10 years and their share in the estate does not exceed €122,606.47.

To benefit from the new regulations it is necessary to prove both the deceased and the beneficiaries of the deceased are registered at the local Town Hall and to produce their Spanish Residency Cards. Failure to do so will result in the deceased being treated as non-resident in Spain.

In other regions, which include Alicante and Murcia, there are similar proposals under consideration.

In Andalucia family members under 21 years of age (including adopted children) are exempted from Inheritance Tax. For other close relatives in the line of succession the proposals are for spouses and those over 21 years of age to benefit from a tapered reduction in inheritance tax of 25% in 2005; 50% in 2006, rising to 99% in 2007.

We understand that the proposals under consideration will include payment of a nominal 1% so as to enable the authorities to maintain and monitor tax information.