Inheritance Tax Deferral in Spain: Supreme Court Ruling STS 1297/2025 Changes the Rules

The Spanish Supreme Court has delivered a ruling of enormous practical relevance for inheritance tax in Spain. The judgment, STS 1297/2025 of 15 October, resolves a question that directly affects thousands of heirs — particularly expats on the Costa Blanca who inherit property-heavy estates with limited liquid assets.

The Problem: A Regulatory Restriction That Contradicted the Law

When someone dies in Spain, the heirs have 6 months to file and pay the Inheritance and Gift Tax (*Impuesto sobre Sucesiones y Donaciones*, ISD). A 6-month extension can be requested within the first 5 months.

Spanish law also provides the possibility of deferring payment when the estate lacks liquidity — a common scenario when the inheritance consists primarily of real estate, company shares, or other assets that cannot be easily converted to cash.

However, for years the Spanish tax authority (*Hacienda*) applied a restrictive interpretation based on Article 90.2 of the ISD Regulation. Under this reading, the deferral request had to be submitted within the first 5 months following the death. Applications filed together with the self-assessment on the last day of the 6-month period were systematically rejected as "extemporaneous."

This created an absurd situation: the law granted 6 months to file and pay, but the regulation effectively reduced the deferral window to only 5 months.

What the Supreme Court Decided

The Supreme Court has corrected this interpretation and established clear legal doctrine:

• Article 38 of the LISD (which refers to deferral of "assessed tax bills") applies only to the administrative assessment regime (*liquidación administrativa*).
• In the self-assessment regime (*autoliquidación*) — which is mandatory in the vast majority of Spain's Autonomous Communities, including the Comunidad Valenciana — the deferral is governed by Article 37 of the LISD and the general rules on tax collection under the *Ley General Tributaria* (LGT) and the *Reglamento General de Recaudación* (RGR).
• Consequently, the deferral request may be submitted at any point within the full 6-month voluntary payment period, or simultaneously with the self-assessment itself.
• A regulation cannot reduce a deadline established by a law of superior rank (LGT).

Why This Matters for Expats on the Costa Blanca

This ruling is especially significant for foreign residents and non-residents who inherit property in Spain. On the Costa Blanca, it is extremely common for an estate to consist almost entirely of:

• Residential property (the family home or holiday apartment)
• Parking spaces, storage rooms, or garages
• Company shares in a Spanish *Sociedad Limitada* (SL)
• Land or rural plots