Inheritance Tax in Bilbao: the foral regime of Bizkaia and its advantages for family inheritances

The foral ISD regime in the Basque Country: why Bizkaia is different

Inheritance Tax in Bilbao and across the Basque Country is not governed by the national Impuesto sobre Sucesiones y Donaciones legislation or by the regional reductions that apply in communities such as Madrid, Andalucia or Catalonia. The Basque Country has its own tax system, regulated by the Concierto Economico (Economic Agreement) with the Spanish State, which gives each of the three historic territories (Bizkaia, Gipuzkoa and Alava) exclusive competence to regulate, administer and collect the ISD within their respective territories.

This means that if the deceased had their habitual residence in Bilbao or in any municipality of Bizkaia, the inheritance is settled entirely before Hacienda Foral de Bizkaia (HFB) under the Norma Foral 4/2015, de 25 de marzo, del Impuesto sobre Sucesiones y Donaciones de Bizkaia. This foral law differs substantially from the national rules in key respects: kinship allowances, rate scale, multiplier coefficients and the treatment of family businesses.

The principal difference is that there is no “99% reduction” in Bizkaia as there is in Madrid or Andalucia. Instead, the foral rules establish large direct allowances against the taxable base for close heirs, which in many cases produce an equivalent or even more favourable outcome than the reductions available under the general regime. For ordinary inheritances (those whose value falls below the applicable allowance per heir), the ISD liability in Bizkaia may be zero.

At BMC we have specialists in the foral ISD regime of Bizkaia and in Basque succession law, enabling us to provide technically authoritative advice to families in Bilbao and across Bizkaia.

Allowances under the Norma Foral of Bizkaia

The Norma Foral 4/2015 of Bizkaia sets the following kinship allowances against the taxable base:

Group I: descendants under 25 and adopted children

The allowance is 400,621 euros (updated periodically), increased by 8,024 euros for each year the heir is under 25. This means an heir aged 18 can have an allowance of more than 460,000 euros, and that inheritances valued below that amount attract zero ISD in Bizkaia.

Group II: spouse and descendants aged 25 or over

The allowance is 400,621 euros for the spouse or registered domestic partner (pareja de hecho inscrita). For descendants aged over 25, the allowance is approximately 48,000 to 50,000 euros (significantly lower than for under-25s). A spouse with an inheritance of less than 400,000 euros pays zero ISD in Bizkaia.

Groups III and IV

The allowances are smaller, and inheritances between collateral relatives (siblings, uncles and nieces) or between unrelated persons can generate material tax liabilities.

Additional disability allowances

Heirs with a recognised disability qualify for additional allowances that can double or triple the base amount depending on the degree of disability.

The ISD rate scale in Bizkaia

The ISD rate scale in Bizkaia is applied to the net taxable base (taxable base minus allowances). It is progressive, with rates ranging from 1.5% for taxable bases up to 6,000 euros to 30% for bases above 400,000 euros.

A multiplier coefficient is then applied to the resulting tax based on the heir’s existing wealth and kinship group. The coefficient for Group II (adult descendants and spouse) is generally the most favourable.

Bizkaia family businesses: one of Spain’s most robust entrepreneurial fabrics

Bizkaia and Greater Bilbao are home to one of the highest densities of family businesses in Spain, with long-established companies in sectors such as steelmaking, metal manufacturing, automotive parts, engineering, professional services, hospitality and retail. The generational transfer of these businesses is one of the areas in which BMC has the greatest experience and where specialist advice has the most significant impact.

The Norma Foral of Bizkaia allows a 95% reduction on the value of family-business shareholdings (subject to the same substantive requirements as the national rules), but with one very important difference: the asset-retention period is five years (rather than ten), facilitating post-inheritance business restructuring without losing the tax benefit already applied.

For companies in the Greater Bilbao automotive cluster, the Sestao and Santurtzi shipbuilding industry, the metal manufacturing sector in Barakaldo, and engineering firms in Basauri and Arrigorriaga, succession planning is a strategic necessity. BMC designs generational transfer plans combining the 95% foral ISD reduction with tax planning on income, wealth and the optimal corporate structure for each family business.

Hacienda Foral de Bizkaia jurisdiction: when does it apply?

Hacienda Foral de Bizkaia’s competence to assess the ISD is determined by the deceased’s habitual residence at the time of death:

• If the deceased had been resident in Bizkaia for more than five years before death, the ISD is settled entirely before HFB under the foral rules.
• If the deceased had been resident in Bizkaia for less than five years, the rules of the territory where the deceased had been resident for the greater part of the preceding five years may apply.

This territorial competence rule is decisive where the deceased was a recent Bizkaia resident (for example, retirees who moved to the Basque Country in recent years) or where the deceased had moved between the Basque Country and another region in the years before death.

BMC analyses the correct territorial competence in each case and manages the estate file before the competent body, whether that is Hacienda Foral de Bizkaia, another historic territory’s treasury, or the relevant regional authority if the deceased was resident elsewhere.

Cross-border inheritances: estate in Bizkaia with assets in other regions

Where the deceased was resident in Bizkaia but held assets in other autonomous communities (for example, a flat in Madrid, a holiday apartment in Valencia or shares in a company based in Catalonia), the entire ISD is settled before Hacienda Foral de Bizkaia and the foral rules apply to the total estate.

This can be very advantageous where the estate is of significant value, since the Bizkaia rules (with their 400,000-euro kinship allowances) may result in a lower burden than would have applied had the deceased been resident in the community where the assets are located.

For assets abroad (foreign bank accounts, overseas real estate, shareholdings in foreign companies), any succession-related double-tax treaties that Spain has concluded must be analysed to avoid double taxation.

Lifetime gifts under the Bizkaia foral ISD

The Norma Foral of Bizkaia also governs inter vivos gifts. Gifts to direct-line heirs benefit from allowances similar to those for inheritances, though with specific differences. For Bizkaia families wishing to transfer part of their wealth during the owner’s lifetime, gifts can be a complementary tool alongside the inheritance, provided the impact on the donor’s IRPF is taken into account (a gift can generate a capital gain for the donor that is subject to income tax).

BMC assesses in each case whether a lifetime transfer or a mortis causa transfer is fiscally more efficient, taking into account the foral ISD, the donor’s IRPF and the family’s overall financial position.

BMC in Bilbao: tax advisers specialising in the foral regime

BMC has specialists in the Basque Country’s foral tax system with proven experience before Hacienda Foral de Bizkaia and in the foral ISD. We manage inheritances for Bilbao families with family businesses, real estate and financial assets, from the initial inventory through to submission before HFB and post-inheritance planning.

In addition to the ISD, BMC manages income tax (IRPF) under foral Basque rules, Non-Resident Income Tax and Wealth Tax (which also has its own foral rules in Bizkaia). The initial consultation is free.

BMC has a presence in Bilbao. Find out about our Bilbao representation for local, dedicated support.