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Inheritance Tax
Your estate will be subject to Spanish Inheritance Tax if you die while owning property in Spain.
Inheritance Tax is a complicated business in Spain and the rate payable depends on both the proximity of relationship between the testator & beneficiary, and the amount being bequeathed.
Tax-free allowances are given to certain beneficiaries, with close relatives receiving higher allowances. The standard allowance is approximately €16,000, unless minor children are inheriting and the allowance is more.
The rate of inheritance tax (2010 rates) is as follows:
From (euro) To (euro) Inheritance Tax IHT payable (euro)
€0,00 €7.993,46 7.65% €611,50
€7.993,46 €15.980,91 8.50% €1.290,43
€15.980,91 €23.986,36 9.35% €2.037,26
€23.968,36 €31.955,81 10.20% €2.851,98
€31.955,81 €39.943,26 11.05% €3.734,59
€39.943,26 €47.930,26 11.90% €4.685,10
€47.930,72 €55.918,17 12.75% €5.703,50
€55.918,17 €63.905,62 13.60% €6.789,79
€63.905,62 €71.893,07 14.45% €7.943,98
€71.893,07 €79.880,52 15.30% €9.166,06
€79.880,52 €119.757,67 16.15% €15.606,22
€119.757,67 €159.634,83 18.70% €23.063,25
€159.634,83 €239.389,13 21.25% €40.011,04
€239.389,13 €398.777,54 25.50% €80.655,08
€398.777,54 €797.555,08 29.75% €199.291,40
€797.555,08 plus 34%  
You should bear in mind that a bequest to non-relatives attracts considerably higher levels of inheritance tax in Spain, as people are encouraged to leave their property to family members.
This is especially important to bear in mind if you are an unmarried couple. The Andalucía province has recently modified this somewhat harsh law, so that providing non-married couples register with the appropriate authorities, they can enjoy the same exemptions as married couples.