Germany

Inheritance Tax in Spain vs Germany: What German Heirs Actually Pay

Published April 2025 · 12 min read · By International Inheritance Spain

Germany and Spain have one of the world's few bilateral inheritance and gift tax treaties — signed in Bonn on 8 November 1966. For German families inheriting Spanish assets, this treaty is central to understanding what you actually pay. But it does not eliminate all tax; it governs how the two countries divide the tax burden between them.

This article compares the two systems and explains, with examples, what German heirs typically pay when inheriting in Spain.

German Inheritance Tax: Key Features

Germany levies Erbschaftsteuer on the worldwide estate of German-domiciled individuals and on German-situs assets of non-residents. The key features:

• Allowances: Spouse/registered partner: €500,000; each child: €400,000; each grandchild: €200,000; siblings: €20,000; unrelated heirs: €20,000
• Rates: Tax class I (close family) pays 7–30% depending on the taxable amount; Tax class II (siblings) pays 15–43%; Tax class III (unrelated) pays 30–50%
• Principal residence exemption: A spouse or child inheriting the family home and occupying it for 10 years pays no Erbschaftsteuer on it (under certain conditions)
• Business assets: Substantial exemptions under §§ 13a, 13b ErbStG for business succession

Spanish Inheritance Tax: Key Features

Spain levies Impuesto sobre Sucesiones y Donaciones (ISD) on assets located in Spain. Key features:

• National allowances: €15,957 for children and parents; €7,993 for siblings; €0 for unrelated heirs (before regional rules)
• Regional reductions: Enormous variation — Andalucía and Madrid effectively exempt direct relatives; Cataluña is much more expensive
• National rates: 7.65% to 34% on the taxable base, then multiplied by a coefficient (up to 2.4×) based on the heir's pre-existing wealth
• Non-resident heirs: Following the ECJ ruling of 2014, German heirs can claim the same regional reductions as residents

How the 1966 Treaty Works

The treaty establishes primary taxing rights based on asset type and location:

• Spanish real estate: Spain has primary taxing rights; Germany credits the Spanish tax against German Erbschaftsteuer
• Spanish business assets: Spain has primary taxing rights
• Shares in Spanish companies: If the company's assets are primarily Spanish real estate, Spain has primary rights
• Movable assets (bank accounts, investments, personal property): Generally the country of domicile (Germany) has primary rights — but Spanish bank accounts held through Spanish institutions can be taxed in Spain

Worked Example: Bavarian Family Inheriting Costa del Sol Property

Situation: A German father (domiciled in Munich) dies leaving a €500,000 apartment in Marbella (Andalucía) to his son. The son lives in Frankfurt.

Spanish inheritance tax (Andalucía):

• Taxable base: €500,000
• National allowance: €15,957
• Andalucian reduction: 99% of the remaining taxable base for direct relatives (introduced in 2019)
• Effective Spanish inheritance tax: approximately €0–€200 (depending on exact calculation)

German inheritance tax:

• Taxable estate: €500,000 (Spanish property)
• German allowance for child: €400,000
• Taxable amount in Germany: €100,000
• Rate (Tax class I): 11%
• German Erbschaftsteuer: €11,000
• Less credit for Spanish tax paid: ~€0
• German tax after treaty credit: €11,000

Total tax: Approximately €11,000 on a €500,000 property — an effective rate of 2.2%.

Example 2: Property in Cataluña

Situation: Same facts but property in Barcelona (Cataluña).

• Spanish inheritance tax (Cataluña): No 99% regional reduction; national allowance only
• Taxable base: €484,043; effective Spanish rate for this value: approximately 15–18%
• Spanish inheritance tax: approximately €70,000–€85,000
• German Erbschaftsteuer: €11,000
• Treaty credit: Spanish tax attributable to the property (€70,000+) exceeds German tax (€11,000), so German tax is fully credited — German tax payable: €0
• Total tax: approximately €70,000–€85,000 (paid entirely in Spain)

This illustrates the significance of the region where the Spanish property is located.

Planning Implications for German Property Owners in Spain

For German nationals owning Spanish property, the most important planning steps are:

• Make a Spanish will (and if desired, exercise professio iuris under EU Regulation 650/2012 to choose German law for non-immovable assets)
• Consider whether the property is in a high-tax or low-tax Spanish region
• Structure the purchase correctly — joint ownership between spouses at acquisition can simplify inheritance
• Consider life insurance as a tax-efficient vehicle to provide liquidity for tax payments