Renouncing an inheritance to a sibling triggers Inheritance Tax

Renouncing an inheritance to a sibling triggers Inheritance Tax

The Dirección General de Tributos (DGT) clarified in a March 20 ruling that renouncing an inheritance in favor of a specific person does not exempt the heir from tax liability. The agency states this is not a "pure, simple, and gratuitous" waiver but constitutes prior acceptance. In practice: you inherit first, then donate, resulting in double taxation.

The case involves a taxpayer who waived their 25% share of an inherited apartment in favor of a brother. The DGT concluded this gesture does not exempt them from paying Impuesto sobre Sucesiones (Inheritance Tax) on that portion, considering kinship with the deceased and pre-existing wealth. The benefiting brother pays Impuesto sobre Donaciones (Gift Tax) for the inter vivos transfer.

Difference between pure waiver and waiver in favor of a third party

The key lies in the method. A pure and simple waiver—declining before a notary without naming a beneficiary—redistributes the share among other heirs, costing the waiving party nothing. This mechanism, outlined in the Civil Code, applies when someone wants no part of an estate due to debts, ruin, or disinterest.

Waiving in favor of a specific person is different. The tax authority views it as prior acceptance trinc by a donation. The result is double payment: Inheritance Tax for the waiving party, Gift Tax for the recipient. If the beneficiary later sells the property, further capital gains taxes may apply.

Income Tax also enters the equation

The DGT adds a third layer: the donating heir must pay IRPF (Personal Income Tax) if the transaction generates a capital gain. This is calculated by comparing the 25% share's value at the date of death against its value at the time of donation, capped at market price. Losses cannot be deducted.

Detailed calculations often surprise those new to the process. Inherited property is not acquired at zero cost; it carries a fiscal valuation affecting all subsequent transactions. Those donating inherited apartments start from this baseline value.

Why prior acceptance is assumed before waiver

The logic is legal, not economic. To give something, one must possess it. Waiving in favor of a specific third party implies disposing of an asset, which requires prior ownership. Hence, the presumption of acceptance and double taxation.

Critics argue this empties the right to repudiate an inheritance when other family members accept it. In extreme cases involving estates with more debt than assets, if repudiation still incurs tax, what purpose does the right to accept or reject serve?

What happens to the 25% when one of four siblings waives

In an estate split among four siblings, the waived 25% redistributes proportionally among the remaining three via classic accretion. Each ends up with one-third instead of one-quarter, taxing only what they actually receive.

The State only inherits if all waive or no heirs exist under intestate succession rules. State treasury data shows €64,921,111.31 collected from 497 intestate cases between January 2015 and May 2025. While modest compared to ordinary collections, it illustrates the State's ultimate fallback position.

Regional differences alter the bill

Tax rates vary by autonomous community. Madrid and Valencia offer 99% reductions on Inheritance and Gift Taxes, making costs negligible for both acceptance and donation. Other regions impose significant bills, especially for heirs with high pre-existing wealth.

This territorial disparity explains why the same operation—waiving in favor of a sibling—can cost almost nothing or a substantial sum depending on location. It also drives people to plan estates years in advance, sometimes using methods that test legal boundaries.

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The debate hits a deadlock: if waiving in favor of a third party is a donation, the right to repudiate only works when waiving to no one. If you waive something for someone, the tax authority charges you for having possessed it. The paradox is that you never truly held it.