Inheritance Tax in Madrid: the 99% Rebate, Allowances and Deadlines
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Inheritance tax in Madrid (formally the Impuesto sobre Sucesiones) is one of the region’s best-known fiscal attractions for families inheriting property. Spouses, children, grandchildren, parents and grandparents can claim a 99% rebate on the tax due, so only 1% is actually paid.
A rebate does not mean no paperwork, however: the estate must still be valued, declared and settled on time. This guide, based on information published by the Community of Madrid, explains how the tax works, which allowances apply, how an inherited home is valued and what options you have once the property passes into your hands.
What the tax covers and who must file
Inheritance tax applies to the transfer of assets and rights on death. It is the heirs and legatees who are taxed on what they receive, not the deceased. Each heir files their own self-assessment (form 650), although any heir may file on behalf of the others if they hold their authorisation and a copy of their ID. Beneficiaries of death-cover life insurance must also file when the policyholder is someone else.
The Community of Madrid is responsible for the assessment when the deceased had their habitual residence in the region for the greatest number of days over the previous five years. It is a test worth checking from the outset in estates with international links.
The 99% rebate in the Community of Madrid
With effect from 1 January 2007, the Community of Madrid applies a 99% rebate on the tax due to heirs in groups I and II. In practice, only 1% of the tax is paid. Everything depends on the family relationship:
Group I: descendants and adopted children under 21 — 99% rebate.
Group II: descendants and adopted children aged 21 or over, spouse, ascendants and adopters — 99% rebate.
Group III: collateral relatives of the second and third degree (siblings, uncles and aunts, nephews and nieces) and ascendants and descendants by marriage — 50% rebate for deaths occurring from 1 July 2025.
Group IV: collateral relatives of the fourth degree, more distant relatives and unrelated heirs — no relationship allowance and none of the rebates described above.
For deaths between 28 October 2022 and 30 June 2025, the rebate for siblings, uncles, aunts, nephews and nieces by blood was 25%.
As an example published by the authorities themselves: on a gross tax charge of €1,250, the 99% rebate reduces the amount payable to €12.50.
Allowances applied to the taxable base
Before the rebate is applied, Madrid’s rules allow the taxable base to be reduced. The main allowances are:
Family relationship: group I, €16,000 plus €4,000 for each year under 21, up to a maximum of €48,000; group II, €16,000; group III, €8,000; group IV, none.
Deceased’s main home: a 95% reduction on the net value of the home, capped at €123,000 per heir, when it is acquired by the spouse, ascendants, descendants or a collateral relative over 65 who lived with the deceased during the previous two years. The property must be retained for five years.
Disability: €55,000 (disability of 33% or more) or €153,000 (65% or more).
Life insurance: 100% up to €9,200, for the spouse, ascendants, descendants, adopters and adopted children.
Sole-trader businesses or shareholdings: a 95% reduction and, from 1 July 2026, a Madrid-specific 99% reduction where the conditions are met.
Each allowance has its own conditions, in particular minimum holding periods. A prior review with a tax adviser helps avoid costly mistakes.
How an inherited property is valued
Assets are valued as at the date of death. For deaths from 1 January 2022, the value of apartments, houses, garage spaces, storage rooms and rural land is the reference value set by the Land Registry (Catastro). If the value declared by the heirs is higher, that figure is used as the taxable base.
For a prime property, whose market price may differ from that reference value, an independent real estate appraisal in Madrid helps you decide whether to keep, sell or divide the property.
Deadlines and how to file
The filing deadline is six months from the date of death. It can be extended by a further six months if the extension is requested before the first five months have elapsed; an extension carries late-payment interest.
Since 31 December 2020, self-assessment has been the only filing method. You can file electronically through the Community of Madrid’s Virtual Tax Office (with a recognised digital certificate, Cl@ve or electronic ID), or in person by appointment. You will need the deed of acceptance of the inheritance or, failing that, a private document signed by all heirs setting out the inventory and valuation of the assets.
If assets are found after filing, a supplementary filing (adición de herencia) is required; if made late, it carries surcharges and late-payment interest.
What to do with an inherited home: keep, let or sell
When several heirs receive a property, it often remains in joint ownership, a situation that can be resolved by assigning the property to one heir, selling it jointly or dividing it. If the property retains a residential or investment use, letting it through professional property management helps preserve its value.
If you decide to sell, an orderly process — valuation, documentation and marketing strategy — makes all the difference. If you are considering selling a property in Madrid, BARNES Madrid will support you in complete confidence. And where the estate includes usufruct rights, it is also worth understanding how bare ownership works.
It depends on the family relationship. Spouses, descendants and ascendants (groups I and II) benefit from a 99% rebate on the tax due, so they pay only 1%. For siblings, uncles, aunts, nephews and nieces, the rebate is 50% for deaths from 1 July 2025.
What is the deadline for filing?
Six months from the date of death, extendable by six months if the extension is requested before the end of the fifth month. An extension carries late-payment interest.
Is it compulsory to go to a notary?
Not to settle the tax: the law allows a private document signed by all heirs to be filed instead, with their identification details and the inventory and valuation of the deceased’s assets, rights and obligations.
Which region assesses the tax?
The Community of Madrid, when the deceased had their habitual residence in the region for the greatest number of days over the previous five years.
At BARNES Madrid we support families and heirs with the property decisions that follow an inheritance: confidential valuation, sale, letting or reorganisation of the estate. If you would like to request a property valuation or speak to our team, contact BARNES Madrid.
We welcome you at 15 Calle Velázquez, in the heart of the Salamanca district.
The information in this article is indicative, is drawn from data published by the Community of Madrid (last updated 1 July 2026) and does not replace personalised tax or legal advice.
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