¿What happens if I don’t pay the taxes on and inheritance?

Why Is It Important to Know This Before Accepting an Inheritance?

Accepting an inheritance is not just an emotional or family matter: it also has legal and tax consequences. In Spain, and specifically in the Balearic Islands, receiving an inheritance entails the obligation to pay the Inheritance and Gift Tax (ISD). This tax applies to both movable assets (cash, vehicles, bank accounts) and immovable property (homes, plots, commercial premises) inherited.

What many people don’t realize is that, even if you have no liquidity or don’t want to accept the inheritance immediately, the clock starts ticking from the date of death. 

If you let the legal deadline pass without taking action, a series of very serious consequences can be triggered:

• • Fines, surcharges, and interest for late filing or non-payment.

• • Seizure of inherited assets.

• • Loss of tax reductions and allowances.

• • Even the inability to sell or register the inherited assets.

That’s why, before accepting an inheritance, it is essential to know:

• • Which taxes must be paid.
    

• • What options exist if you cannot pay on time.

• • What the consequences are if you don’t.

In this article, we explain step by step what happens if the taxes on an inheritance are not paid and how to act to avoid bigger problems.

Which Tax Must Be Paid When Receiving an Inheritance?

When a person dies and transfers assets or rights to their heirs, those heirs must pay the Inheritance and Gift Tax (ISD). This is a state tax whose management is delegated to the autonomous communities, so its practical application—allowances, reductions, and rates—varies depending on the deceased’s place of residence.

What Is the Inheritance and Gift Tax?

It is a direct tax on the acquisition of assets and rights by inheritance, legacy, or any other succession title. It also applies to life insurance in the event of death, unless the policyholder and the beneficiary are the same person.

The tax is progressive: the larger the value of the inheritance and the more distant the family relationship with the deceased, the higher the amount to be paid.

Who Is Required to Pay It?

Each heir, legatee, or beneficiary must file their own tax return. It is not filed jointly; each person settles the tax in proportion to the assets and rights they receive.

• • Natural persons who receive assets or rights by inheritance, legacy, or any succession title.

• • When the deceased resided in Spain, or when the inherited assets are located in Spain, even if the deceased was a non-resident.

When Must the Tax Be Filed and Paid?

The general deadline to file the tax is six months from the date of death. Within the first five months, it is possible to request an extension of another six months, which must be formally processed before the competent tax authority.

The tax must be self-assessed within the deadline, even if the assets have not yet been distributed. Formal acceptance of the inheritance is not required for the tax obligation to arise.

What Happens If It Is Not Filed on Time?

If the tax is not filed within the legal deadline and no extension has been requested, the administration may initiate a verification procedure and impose:

• • Surcharges for late filing without prior notice.

• • Late-payment interest.

• • Penalties, if it considers there has been concealment or resistance to filing.

These effects are analyzed in detail in the next section.

What Happens If I Don’t Pay the Inheritance Tax?

Failing to pay the Inheritance and Gift Tax (ISD) on time does not make the obligation disappear. On the contrary, not filing or paying within the legal period can lead to serious financial, legal, and property-related consequences for the heirs. Below are the main implications of non-payment or late compliance.

Surcharges and Late-Payment Interest

If the tax is not filed within the legally established six-month period, and no extension is requested within the first five months, the filing is considered late. In this case, the Tax Administration will apply the surcharges for late filing provided for in Article 27 of the General Tax Law:

• • Delay of up to 12 months: a fixed surcharge of 1% plus an additional 1% for each full month of delay.

• • Delay of more than 12 months: a fixed 15% surcharge plus the corresponding late-payment interest.

These surcharges are applied automatically, even if the declaration is submitted voluntarily and without prior notice from the administration.

Financial Penalties

In addition to surcharges and interest, the Tax Agency (Agencia Tributaria) may impose penalties if it considers that the taxpayer acted negligently, concealed information, or intended to defraud. The penalty will depend on the severity of the tax offense committed:

• • In minor cases, the penalty can reach up to 50% of the unpaid tax.

• • In serious or very serious cases (e.g., concealment of assets or simulation), the penalty can rise to 150% of the unpaid amount.

The imposition of a penalty requires a sanctioning procedure in which the taxpayer is granted the right to a hearing.

Enforcement Procedure and Seizure of Assets

If the tax is not paid within the voluntary period, nor after a formal notice from the administration, an enforcement procedure begins. This involves an additional surcharge and may result in the seizure of inherited assets.

Even if the heir has not yet registered the property in their name, the administration can act directly against it, since the tax obligation arises at the moment of inheritance, not upon its registration.

Blocking of Property Registration

To register an inherited property in the Land Registry, it is mandatory to provide proof of payment, exemption, or expiration of the Inheritance Tax. If this documentation is not provided, the registrar will deny the registration.

This means heirs will not be able to sell, mortgage, or otherwise dispose of any inherited real estate until their tax situation is regularized.

Loss of Tax Reductions and Allowances

In some autonomous communities, there are significant reductions and allowances on the tax depending on the degree of kinship or the value of the inheritance. However, these benefits are conditional upon filing and paying within the legal deadlines.Filing late can result in the automatic loss of these benefits, significantly increasing the total amount owed.

What Options Do I Have If I Can’t Pay the Inheritance Tax?

Sometimes heirs find themselves facing an inheritance that includes valuable assets but not enough liquidity to pay the Inheritance and Gift Tax (ISD) within the legal deadline. This situation is more common than it seems and can cause great concern—especially when there’s a risk of penalties or asset restrictions.

Fortunately, Spanish law provides several mechanisms to avoid non-payment or at least reduce its consequences. Here are the main alternatives:

Payment Deferral or Instalment Plan

The Tax Administration allows taxpayers to request a deferral or instalment plan for the payment of the inheritance tax when they lack sufficient funds.

General requirements:

 

• • The request must be submitted within the voluntary period (six months from the date of death, or during the extension period if one has been granted).

• • The lack of liquidity must be duly justified.

• • In some cases, the administration may require guarantees (such as a bank guarantee or a mortgage on assets).

• • Late-payment interest will be applied to the deferred amount.

The instalment plan allows the tax to be paid in periodic payments (e.g., monthly or quarterly), under the conditions set by the tax authorities.

This option is especially useful when the heir needs time to sell an asset or gather funds, thus avoiding surcharges or penalties.

Accepting the Inheritance with Benefit of Inventory

The acceptance of inheritance with benefit of inventory is a legal option established in the Spanish Civil Code that protects heirs from being held personally liable for the deceased’s debts.

Key advantages:

• • The heir is only responsible for the deceased’s debts up to the value of the inherited assets.

• • The heir’s personal assets remain protected.

• • It allows for a detailed assessment of the deceased’s financial situation before assuming liabilities.

This procedure must be carried out before a notary or through judicial proceedings and within the legal deadlines. Although it does not exempt the heir from filing the tax, it can be an important way to avoid personal financial risks.

Selling Part of the Inherited Assets to Pay the Tax

Another practical solution is to sell part of the inherited assets (real estate, vehicles, jewelry, etc.) to generate liquidity and pay the tax.

However, it’s important to note that to sell an inherited asset, it must first be registered in the heir’s name, which in turn requires paying the tax beforehand. Therefore, it may be necessary to:

• • Request a payment deferral in order to register the asset before selling it.

• • Negotiate with the buyer for an advance payment to cover the tax (a more complex and risky option).

This is a common solution in inheritances consisting mainly of non-liquid assets, provided that there is market demand for their sale.

Renouncing an Inheritance

If the inheritance is clearly unviable or represents an excessive financial burden, the heir may formally renounce it. This decision must be made:

• • By public deed before a notary.
    

• • Before performing any act that implies tacit acceptance of the inheritance.

Renouncing the inheritance means that:

• • The heir does not acquire either the assets or the debts of the inheritance.

• • The heir is not obliged to pay the tax.

• • The inheritance passes to the next person entitled, according to the will or by law (another heir, or even the State if there are no other successors).

It is a legitimate and prudent option in cases where the net value of the inheritance is negative or when the debts exceed the benefits.

How Long Does the Tax Authority Have to Claim the Tax?

The passage of time has important effects in tax matters. The Inheritance and Gift Tax, like any other tax obligation, cannot be claimed indefinitely. If a certain period elapses without action from the Tax Administration, the right to demand payment expires due to prescription.

This concept — prescription — is crucial to determine whether the Tax Authority can still claim the tax or whether, on the contrary, it has already lost that right.

General Prescription Period

According to Article 66 of the General Tax Law, the Tax Authority’s right to determine and demand payment of the Inheritance and Gift Tax expires after four years.

This period begins:

• • The day after the legal deadline for filing the tax return ends (that is, six months after the date of death, unless an extension has been granted).

Therefore, if more than four years and six months have passed since the date of death without the Tax Authority requesting payment or the declaration being filed, the tax may be considered time-barred (prescribed).

What Interrupts the Prescription Period?

The prescription period can be interrupted for several reasons, including:

• • Filing the self-assessment, even if payment has not been made.

• • Any administrative action aimed at verifying, inspecting, or collecting the tax (for example, a requirement or official notification).

• • Any action by the taxpayer that acknowledges the debt or requests a payment plan.

• • The filing of appeals or claims related to the tax procedure.

When the prescription is interrupted, the four-year period starts anew from the date of the last valid action.

What Happens If the Tax Has Prescribed?

If the Tax Authority’s right to settle the tax has prescribed, it can no longer initiate proceedings to demand payment. In that case: 

• • No penalties can be imposed, nor can enforcement procedures begin.

• • The prescription may be invoked as a reason for the extinction of the tax obligation.

• • The heir may still regularize the situation voluntarily if needed to register assets or carry out subsequent procedures (for example, selling a property).

Important: Prescription does not automatically legalize the inherited assets, since the Land Registry will require proof of tax payment, exemption, or prescription via an administrative certificate. To obtain it, a prescription file must be processed before the tax authority, following specific requirements and procedures.

In Summary

The Tax Authority has four years to demand payment of the inheritance tax, but this period can be easily interrupted. If the taxpayer has remained inactive and the administration has not acted, it is possible that the tax obligation has prescribed, which can help avoid penalties and asset seizures—although additional administrative steps may still be required to fully regularize the situation.

Practical Recommendations for Heirs

Receiving an inheritance is not just a family or emotional act; it involves a series of tax obligations that must be taken seriously and met within the legal deadlines. Failing to meet these obligations can lead to surcharges, interest, financial penalties, asset seizures, or even the loss of tax benefits.

Throughout this article, we have seen that:

• • The Inheritance and Gift Tax (ISD) is mandatory, individual, and must be filed within a general six-month period from the date of death.

• • Not paying or failing to file the tax can trigger sanctioning procedures and enforcement actions by the Tax Administration.

• • There are legal solutions such as deferring payment, installment plans, accepting the inheritance with benefit of inventory, or even renouncing the inheritance, which allow for the protection of the heir’s assets in complex situations.

• • The tax expires after four years, though this period can easily be interrupted by actions taken by the Tax Administration or the taxpayer.

• • In many cases, heirs are unaware of these obligations or act too late, which worsens the economic and legal situation.

Basic Recommendations If You Are Receiving an Inheritance:

• • Get informed about your tax obligations as soon as possible. Don’t let the deadlines pass.

• • Consult a lawyer specialized in inheritance law to assess whether accepting the inheritance is advisable and how to do so.

• • If you can’t pay the tax, request a deferral or installment plan within the legal deadline.

• • Don’t dispose of inherited assets without first settling the tax.

• • If several years have passed without processing the inheritance, assess the possibility that the tax may have expired, but always seek professional advice.

• • Always keep all documentation related to the death, the deceased’s assets, and your actions as the heir.

In conclusion, proper management of an inheritance requires information, adherence to deadlines, and legal advice. Acting on time can help prevent legal issues, penalties, and family conflicts.

At Rodríguez Tur Abogados, we have extensive experience in inheritance law and inheritance taxation. If you have any doubts or need to regularize an inheritance, we are here to help you make safe, legally sound decisions.