Catalonia Uses 'Inheritance Pact' to Reduce Inheritance Taxes. Catalonia has a unique inheritance transfer mechanism known as the 'inheritance pact.' This scheme significantly reduces the tax burden but is only available to residents of the region. There is no such option in Asturias.
In Catalonia, there is a little-known but extremely advantageous tool for heirs—the “inheritance pact.” Unlike Madrid’s high-profile announcements about cutting inheritance and gift taxes, the Catalan mechanism operates more quietly, yet allows for significant tax savings. For residents of Asturias, where the tax burden on inheritances remains among the highest in the country, this scheme is unavailable.
In Madrid, for several consecutive years, the authorities have been announcing further reductions in inheritance and gift tax rates. Currently, a 99 percent reduction applies, making the transfer of large assets almost free for heirs. In other regions, including Andalusia, the Balearic Islands, Cantabria, and Galicia, the inheritance tax for close relatives is effectively non-existent. However, in Asturias and Catalonia, rates remain significantly higher: according to REAF, inheriting 800,000 euros in Asturias would cost over 103,000 euros in taxes, about 44,000 euros in Catalonia, and just over 1,000 euros in Madrid.
The main difference in Catalonia is the ability to use the ‘inheritance pact’. This is a notarial agreement that allows assets to be transferred while the owner is still alive, but for tax purposes, such a transfer is considered an inheritance rather than a gift. For the heir, this means a lower tax rate: for example, when transferring 800,000 euros, the tax is reduced from 56,000 to 44,000 euros. Moreover, this scheme does not create an obligation to pay income tax on the capital gain from the assets, as confirmed by a recent decision from the Tax Authority. In other regions, where only gifts are used, the asset owner may face an additional capital gains tax if the value of the property has increased since purchase.
In Catalonia, the ‘inheritance pact’ allows not only to reduce the tax burden but also to transfer assets immediately to the heir, without waiting for the owner’s death. The heir can also update the value of the received asset for future transactions, which is usually only possible after the benefactor’s death. Importantly, only those with Catalan civil status and close family ties can use this mechanism. For residents of Asturias and most other regions of the country, this scheme is not available, as their civil law does not provide for such agreements.
Questions of regional differences in inheritance and gift taxes regularly spark debate and comparisons between autonomous communities. For example, as shown by an analysis of the situation with military investments in Jaén,, differences in the authorities' approaches can lead to noticeable consequences for residents and businesses.
For reference: the “inheritance pact” is enshrined in the Civil Code of Catalonia and does not apply in regions without their own civil law. In Spain, the inheritance tax is regulated at the level of autonomous communities, leading to significant differences in rates and benefits. In recent years, many regions have moved toward reducing the tax burden, but only Catalonia offers such a specific instrument as the “inheritance pact,” which allows not only to avoid high rates but also additional capital gains taxes.
