Madrid has operated a 99% inheritance and gift tax bonificación for Group I and II beneficiaries since 2006, and extended the credit to Group III (siblings, nieces, nephews, uncles and aunts) through reforms in 2023 and 2024. For families with Madrid property or Madrid-resident deceased, Spanish IHT is routinely symbolic — under €1,000 on estates worth well over a million. Non-resident heirs can elect Madrid rules on Modelo 650.
The Comunidad de Madrid — covering the capital and its satellite towns across Alcobendas, Pozuelo, Las Rozas, Majadahonda, La Moraleja, Aravaca, Boadilla del Monte, Chamartín, Salamanca and Chueca — is the wealthiest region in Spain by most metrics and the most generous on inheritance and gift tax. Madrid was the first Spanish region to implement a 99% bonificación, in 2006, and has retained it through every political cycle since. For British, American, French, Italian and other expats with Madrid-based careers, apartments in Barrio de Salamanca, houses in the La Moraleja belt, or wealth tied to Madrid-quoted companies, the region's IHT regime is transformational.
The Madrid system is structured as a post-quota credit: state allowances apply, the tariff is applied, the group coefficient is applied, and then the Madrid bonificación wipes out 99% of the resulting tax. For Group I (descendants under 21) and Group II (spouse, adult children, parents, grandparents) the bonificación has been at 99% since 2006. For Group III (siblings, nieces and nephews, uncles and aunts, in-laws) Madrid introduced first a 25% bonificación in late 2022 and then raised it step-wise, reaching 50% and ultimately 99% through Ley 13/2023 reforms effective through 2024. Group IV — unrelated beneficiaries and cousins — does not access the bonificación and pays full marginal rates.
This page covers the Madrid IHT framework, the Group III extension and its practical reach, the gift tax interaction, and the mechanics of filing at the Madrid regional tax office. If your matter involves Madrid — the deceased lived there, the property sits there, or the beneficiary elects regional rules — open a file with us.
Madrid's regime is a post-quota credit plus Group III extension. These six rules drive every calculation.
In force since 2006. Applies to spouses, descendants, ascendants. Post-quota credit — extinguishes 99% of the tax after all other mechanics.
Core creditLey 13/2023 and subsequent regulation raised the Group III bonificación to 99% through 2024. Siblings, nieces, nephews, aunts, uncles and in-laws now access the full credit.
Broad creditSame 99% credit applies to lifetime gifts for Group I, II and III recipients. Lifetime transfer of Madrid property is materially tax-efficient.
Gift parityNon-resident heirs of Madrid property or Madrid-resident deceased's estate elect Madrid rules on Modelo 650. 99% bonificación accessible cross-border.
Cross-borderFiled with the Dirección General de Tributos of the Comunidad de Madrid. Oficina de Gran Vía or e-filing via Madrid portal. Six-month deadline.
Regional filingMadrid applies a 100% bonificación on regional wealth tax — effectively abolished at regional level. Federal solidarity tax applies above €3m threshold from 2023.
Zero wealth taxThe Group III extension is the most significant Madrid IHT development of recent years and is frequently missed by practitioners who last looked at the region's rules pre-2023. Group III includes: siblings of the deceased, nieces and nephews, aunts and uncles, and in-laws (parents-in-law, siblings-in-law, children-in-law). Before late 2022, these beneficiaries faced effective Madrid tax rates of 15% to 30% on substantial estates. After the reform, the effective tax is near zero for estates up to several million euros.
The practical reach is wide. A common structure for childless Madrid expats is a will leaving property to nieces and nephews; before 2023, this produced real tax liabilities that drove many families to lifetime gift alternatives or pareja de hecho registration. Post-reform, direct inheritance by nieces and nephews delivers the same result without structural workarounds. We routinely update childless-client wills to reflect the new Group III position.
Madrid operates a regional register of parejas de hecho. Registered partners access Group II (spousal) treatment for IHT purposes, meaning the 99% bonificación. Post the Group III 99% extension, the incremental benefit of registration has narrowed — an unregistered partner falls into Group IV (full marginal rate), but if the inheritance path runs through siblings or other Group III family first, the tax position for the surviving partner via family generosity can be reached at 99% too. For unmarried couples in Madrid with no children, registration remains strongly recommended despite the narrowed differential.
Madrid has applied a 100% regional wealth tax bonificación for many years, effectively abolishing the wealth tax at regional level. The federal government's 2022 Ley 38/2022 introduced a solidarity tax on fortunes above €3 million, applicable at national level regardless of region. Madrid residents above the €3m threshold pay solidarity tax on the slice above the threshold. The Madrid IHT bonificación and the federal solidarity tax are independent mechanisms: one applies at death, the other annually on living wealth. Lifetime planning for Madrid-resident high-net-worth individuals now turns on the solidarity tax calculation more than the IHT position, which is effectively solved.
We confirm the deceased's habitual residence in Madrid (or the property's location for non-resident matters) and classify each beneficiary by group for allowance purposes.
Valor de referencia checked for Spanish property. We screen for the habitual-residence reduction, family-business reduction and region-specific allowances.
Filed with the Madrid regional tax office (or AEAT with regional election for non-residents). UK IHT credit claimed where applicable.
Tax receipts delivered to the notary for inclusion in the escritura. Land Registry transfer lodged. Closing pack to the family in English.
The 2014 ECJ principle allowing non-resident heirs to elect regional rules applies in Madrid as in every region. For a UK-resident adult child inheriting a Barrio de Salamanca apartment from a Madrid-resident parent, the election captures the 99% bonificación. Without the election, default state rules produce a materially worse outcome. Silent filings lose the credit; explicit election on Modelo 650 secures it. We have never filed a Madrid non-resident matter without the election — it is table stakes.
The 99% bonificación applies equally to gift tax. For Madrid-resident parents considering passing property or cash to adult children during lifetime rather than at death, the gift route is as tax-efficient as waiting. This opens planning options that are closed in many other Spanish regions. Considerations include: capital gains tax crystallisation on the donor (the Madrid region cannot change CGT, which is national/state); the loss of the uplift on death; and the general recommendation to preserve some wealth for the donor's own needs. But as a structure, lifetime transfers in Madrid are materially more flexible than elsewhere.
For UK-domiciled deceased with Madrid property, UK IHT applies to the worldwide estate including the Madrid-situated assets. Madrid IHT after the 99% bonificación is near zero. Article 23 credit is available but produces little benefit because there is little Spanish tax to credit. UK IHT dominates the cross-border bill.
For Madrid-resident deceased with retained UK assets (usually ISAs, UK pensions, UK property), Spanish IHT on the worldwide estate applies at Madrid rates — near zero — and UK IHT on UK-situated property applies separately. The credit mechanism can be relevant depending on the mix. We run the calculation both ways at intake.
The valor de referencia system applies in Madrid with some of the highest cadastral-reference values in Spain, particularly in central districts (Salamanca, Chamberí, Retiro, Centro). Clients are sometimes surprised by the declared value required; however, because the 99% bonificación absorbs almost the entire tax, the valuation rarely drives a material IHT outcome. It does drive the plusvalía municipal and any future CGT base, which matters on eventual sale.
Madrid city and each satellite town hall (Pozuelo, Las Rozas, Majadahonda, Alcobendas, Boadilla del Monte, etc.) set their own plusvalía rates within the post-2021 national framework. Madrid city's plusvalía tariffs are among the higher in Spain because land values are high. The election between objective and real-gain calculation applies. We calculate both and file the lower liability.
Modelo 650 is filed at the Dirección General de Tributos of the Comunidad de Madrid, either at the Oficina de Gran Vía or via the regional e-filing portal using a Spanish digital certificate. Non-resident heirs file through the Madrid office under the regional election (not through AEAT). The office accepts apostilled UK documents without additional legalisation steps once accompanied by sworn translation. Processing times are moderate — 4 to 8 weeks for tax receipts, then Land Registry transfer can follow.
Where estates exceed several million euros — typical of our senior-executive and business-owner client base in La Moraleja, Somosaguas, El Viso and similar — the 99% bonificación produces Spanish IHT bills well under €10,000 even on €20m+ estates. This is the practical reality of Madrid's regime: absent Group IV or cousin inheritance, the Spanish tax is effectively solved. The planning focus shifts to UK IHT coordination, federal solidarity tax, and capital gains crystallisation.
Madrid's IHT regime extinguishes almost all Spanish inheritance tax for families. We add value in filing discipline, Group III extension planning, and cross-border coordination.
Request a Madrid CalculationParents resident in Madrid with children abroad; non-resident owners of Madrid property; surviving spouses, siblings, grandparents — the applicable rules vary with the family configuration.
€1.2m Barrio de Salamanca apartment, UK-resident adult child. Post-bonificación Spanish IHT under €2,000. UK IHT dominates cross-border position.
€4.5m La Moraleja house, Spanish-resident surviving spouse. 99% bonificación applies. Spanish IHT under €5,000 on a €4.5m asset.
€650,000 Pozuelo apartment, Group III brother. Post-2024 99% bonificación applies. Effective tax under €1,000.
€900,000 Las Rozas property, two Group III nieces. 99% bonificación applies. Each niece's Spanish tax well under €1,000.
€800,000 central apartment, surviving unregistered partner in Group IV. No bonificación access. Full marginal rate applies — substantial tax.
€550,000 Alcobendas property, Group IV cousins. No bonificación. Full marginal tax — the Madrid regime does not solve Group IV.
Non-resident heirs default to state rules on silent filings. Regional election is the hinge of the whole Madrid benefit — omission costs the 99% credit.
Older advice still treats siblings and nieces as ineligible. The 2023/2024 reforms changed this. Childless clients should update wills to reflect.
Madrid's 100% wealth tax bonificación is regional. The federal solidarity tax above €3m still applies. Two separate taxes.
Registered partners sit in Group II. Unregistered partners fall into Group IV. Register during lifetime — the register is Madrid-specific.
Madrid central-district valor de referencia figures are high. Under-declaration triggers re-assessment and penalties even though the 99% bonificación absorbs tax.
Madrid clock runs from death. Spanish file must open in parallel with UK probate — not sequentially.
Barrio de Salamanca, Chamberí, Retiro, Centro, Chueca. High-value urban inheritance; 99% bonificación transforms the tax position.
High-net-worth expat homes. Full 99% bonificación applies; Group III extension broadens family inheritance options.
Siblings, nieces and nephews now reach 99% treatment. Wills updated post-2024 to reflect. Pareja de hecho registration still advised for unmarried couples.
Suburban family property; same regional rules apply. Municipal plusvalía varies between councils — we screen each.
Shares in Madrid-listed companies sit within Madrid's regime when the deceased was resident there. Worldwide estate treatment on Modelo 650.
Madrid IHT near zero; UK IHT dominant. Coordinated filing strategy across both jurisdictions.
Regional allowances applied, group classifications checked, habitual-residence and family-business reductions screened, deadline tracked.