Heirs will settle Inheritance Tax in the Autonomous Community of the deceased's residence

Determining the applicable regulations for Inheritance and Gift Tax (ISD) is a critical factor that conditions the tax burden on beneficiaries. An error in choosing the competent Autonomous Community can lead to incorrect settlements or the application of tax reliefs that do not correspond to the legally applicable territory.

What the DGT has ruled

The General Directorate of Taxes (DGT) has clarified that the Autonomous Community competent for the settlement of Inheritance Tax is that where the deceased had their habitual residence. To determine this residence, the administration relies on the place where the deceased remained for a greater number of days during the five-year period immediately preceding the date the tax became due.

This criterion seeks to establish an objective link with the territory. The applicable regulations are governed by Law 29/1987 on Inheritance and Gift Tax, in relation to Law 58/2003 General Tax Law (LGT) and Law 22/2009.

What it means for you

If you are in a situation of inheriting assets, the key to knowing which regional regulations will affect you does not lie in the location of the assets, but in the residence history of the deceased. Territorial competence is defined by physical presence in a territory during the last five years.

It is fundamental to understand that habitual residence is a matter of fact. This implies that the administration will not only rely on a census certificate (empadronamiento), but that presence must be proven through means valid under the Law that demonstrate where the deceased spent most of their time during that five-year period prior to death.

What should be done

In a succession situation, it is necessary to perform a prior analysis of the deceased's residence history during the five years preceding their death. It is necessary to gather evidence that proves presence in the Autonomous Community intended to be applied, as the burden of proof lies in accrediting said habitual residence to avoid discrepancies with the tax administration. It is recommended to assess each particular case to ensure that the settlement is carried out in the correct jurisdiction.