Inheritance and Gift Tax (ISD) is a tax devolved to the autonomous communities, which means each one regulates it differently. The difference between inheriting in one community or another can amount to tens of thousands of euros. In the Valencian Community, the rules in force are especially favourable for direct heirs, but only if applied correctly.
Kinship groups and what corresponds to each one
The first step to understanding the tax is to know which kinship group each heir falls into. The law establishes four groups:
| Group | Who it includes | Relief in Valencia |
|---|---|---|
| Group I | Descendants under 21 years of age | 99% (practically €0) |
| Group II | Descendants aged 21 or over, spouse, ascendants | 99% (practically €0) |
| Group III | Collateral relatives of 2nd and 3rd degree, ascendants/descendants by affinity | No regional relief |
| Group IV | Collateral relatives of 4th degree or beyond, unrelated persons | No regional relief |
The key point is that the deceased's children, spouse and parents, the most common heirs, belong to Group II and are entitled to the 99% relief. This means that, in practice, the tax payable is practically zero.
However, this relief is not applied automatically. It must be claimed expressly in the tax return and all formal requirements must be met. And there are mistakes that make it disappear.
Inheritance Tax must be filed within 6 months of the death. This deadline can be extended by a further 6 months, but the extension must be requested before the initial deadline expires. Missing it triggers automatic surcharges of 5% to 20% plus late-payment interest.
How the taxable base is calculated
The taxable base of the tax is the net value of what each heir receives: the deceased's assets and rights less the deductible debts and charges. The state and regional reductions are applied to that base, and the tax due is calculated on the resulting net taxable base, to which the relief is finally applied.
The elements forming part of the estate include real estate (valued at its cadastral reference value or market value, whichever is higher), bank account balances, vehicles, life insurance policies and the so-called household effects, which the law automatically sets at 3% of the value of the estate, unless a lower value is evidenced.
Most relevant reductions in the Valencian Community
In addition to the 99% relief, there are specific reductions that lower the taxable base before applying the rate. The most important ones:
| Reduction | Amount | Main requirements |
|---|---|---|
| Group II kinship | €100,000 per heir | Being a descendant, spouse or ascendant |
| Group I kinship (under 21) | €100,000 + €8,000 per year under 21 | Age of the heir |
| Disability (33%-65%) | €120,000 | Disability certificate |
| Disability (>65%) | €240,000 | Disability certificate |
| Main residence | Up to €150,000 | Must be the deceased's main residence. The heir must keep it for 5 years |
| Family business | 99% of the value | Specific economic-activity requirements |
The most costly mistake: not claiming the relief correctly
The 99% relief is not applied automatically. It must be expressly included in the self-assessed tax return. It seems obvious, but there are agents who file the return without marking it, generating an amount payable that technically does not apply and that later has to be appealed.
Even more common is the mistake in the valuation of the assets. If real estate is declared at a value below the cadastral reference value that the tax authorities use as a minimum, the Administration may issue a supplementary assessment. If declared above the real value, more than necessary is paid.
"In estates with real estate, the correct valuation of the assets is as important as, or more important than, applying the relief. A mistake in the valuation can cost more than the tax itself."
What happens if there is real estate in other autonomous communities
When the estate includes real estate in several autonomous communities, the situation becomes more complex. The tax is settled in the community where the deceased had their main residence, but properties located in other communities may have additional implications for the Tax on the Increase in Value of Urban Land (municipal capital gains tax), which is indeed paid in each municipality where the property is located.
Managing an estate with assets in several communities without coordinated legal advice is one of the mistakes that generates the greatest cost for families.
Deadlines and the complete process
Correct management of the tax follows this order: obtaining the death certificate and the certificate of last wills, locating and valuing all the deceased's assets, drafting and signing the deed of inheritance before a notary, filing the ISD self-assessment with the Conselleria d'Hisenda of the Generalitat Valenciana, settling the municipal capital gains tax in each town hall where there is real estate, and registering the assets at the Land Registry.
This entire process, well coordinated, can be resolved in 2-3 months. Poorly managed, with missed deadlines, incorrect valuations or incomplete documentation, it can turn into a problem that drags on for years.
Free first consultation
At Equus Capital we handle the complete inheritance processing procedure in the Valencian Community, with legal advice specialising in succession law and tax optimisation. The first consultation is free and without obligation.