Form 650 in Madrid: Inheritance Tax Reliefs and Filing Guide

What Form 650 is and who must file it in Madrid

Form 650 is the self-assessment of the Spanish Inheritance and Gift Tax (ISD) in the inheritance modality. It is filed by heirs and legatees who acquire assets and rights upon death. In the Madrid region, Form 650 is processed by the regional tax authority.

The duty to file arises with the death itself, even when the final tax payable is zero because of the regional allowance. It is common for families to assume that "if the bonus is 99% there is nothing to do", and this leads to late filings and surcharges.

Together with Form 650, the recapitulative Form 660 is also required, listing all the deceased's assets and rights (the estate inventory).

Inheritance Tax allowances in Madrid

The Madrid region has maintained a generous allowances policy for the closest relatives for years, and recently extended it to more distant collateral relatives.

Group I and II: 99% allowance (Law 7/2022)

Since the approval of Madrid Regional Law 7/2022, heirs in Groups I and II benefit from a 99% allowance on the Inheritance Tax liability.

• Group I: descendants and adoptees under 21.
• Group II: descendants and adoptees aged 21 or over, spouses, ascendants and adoptive parents.

In practice, this means that a child or spouse inheriting in Madrid pays 1% of what could be a substantial bill in other regions.

Group III: 50% allowance from 1 July 2025 (Law 2/2025)

The recent novelty is Madrid Regional Law 2/2025, which extends a 50% allowance to Group III. It applies to acquisitions accrued from 1 July 2025 onwards.

Group III includes:

• Siblings.
• Uncles, aunts, nephews and nieces.
• Other collateral relatives of the second and third degree.
• Ascendants and descendants by affinity (parents-in-law, sons-in-law, daughters-in-law, etc.).

This is a particularly relevant change for inheritances between siblings or uncles-nephews, who until July 2025 could face a significant tax bill. Worth noting: the date of accrual (the date of death) determines whether this allowance applies.

Filing deadline and possible extension

The general deadline to file Form 650 is 6 months from the date of death. It can be extended by a further 6 months, provided the extension request is filed within the first 5 months of the initial period.

The extension generates late-payment interest during the extended period. If the form is filed late without prior request, the progressive surcharges of Law 11/2021 apply: 1% plus an additional 1% for each full month of delay, up to 12 months; beyond 12 months, 15% plus interest.

Documentation required to file Form 650

The standard list of documents for an inheritance processed in Madrid:

• Full death certificate.
• Certificate from the General Registry of Last Wills.
• Will (if any) or, otherwise, declaration of heirs (abintestato).
• ID document or NIE of all heirs.
• Inventory of assets with valuations: bank balances at the date of death, property deeds, vehicle paperwork, valuation of company shares if applicable.
• IBI receipt and up-to-date Land Registry extract for any real estate.
• Insurer's certificate if there are life insurance policies with named beneficiaries.
• Sufficient succession document and a public deed where it is necessary to allocate or register assets, particularly real estate.

How the Inheritance Tax liability is calculated

The Form 650 calculation follows several steps:

1. Estate value (caudal relicto): the real value of the deceased's assets and rights as at the date of death.
2. Household goods addition: traditionally 3% of the estate, with the 2020 Supreme Court refinement that excludes bank balances and other assets not subject to domestic use.
3. Deduction of charges, debts and expenses: deceased's debts, last illness expenses, funeral and burial costs.
4. Individual taxable base for each heir based on their share.
5. Applicable reductions: by kinship, primary residence, family business, life insurance, disability, etc.
6. Net taxable base: taxable base minus reductions.
7. Gross tax liability: progressive tariff applied to the net base.
8. Tax due: gross liability multiplied by the coefficient based on pre-existing wealth and kinship group.
9. Final amount payable: tax due less the regional allowances (99% or 50% depending on group).

Common mistakes when filing Form 650 in Madrid

From the cases we see every year, the same errors recur:

1. Not filing Form 650 because "the allowance brings the tax to zero". The formal duty to declare exists regardless.
2. Forgetting the plusvalía municipal (Spanish municipal capital gains tax) of the city council where the property is located.
3. Misapplying the primary-residence reduction without meeting the maintenance requirement.
4. Failing to include household goods, or applying the 3% to the entire estate without excluding non-domestic assets.
5. Filing late and only realising afterwards about the surcharges.

Special cases: non-resident heirs and assets in other regions

If any of the heirs lives outside Spain, two things should be carefully reviewed: the possibility to apply the Madrid regional rules (which after the European case-law evolution is also open to non-residents) and the existence of bilateral treaties to avoid double taxation. We covered this in detail in the guide on inheritance with a non-resident heir.

If the inheritance includes assets in other Autonomous Communities, allocation of the tax between authorities can raise questions. The general rule is that the regulations of the Community of habitual residence of the deceased during the five years prior to death apply, but real estate may have specific obligations in its location region (especially for the subsequent registration).

Other special cases we frequently see:

• Minor heirs: filing is done through their legal representatives, normally the parents, and it is worth checking whether acceptance under benefit of inventory is preferable.
• Family business or shares: a 95% reduction on the value of the business or shares applies if the maintenance requirements are met for a set period.
• Primary residence of the deceased: 95% reduction (with maximum limits) if the heir is a spouse, ascendant or descendant and keeps the home for the established period.
• Heir with recognised disability: additional reductions depending on the degree of disability.
• Inheritance waiver: must be pure, simple and gratuitous, granted in a public deed; any conditional waiver or one in favour of a specific person is treated for tax purposes as acceptance plus a subsequent gift.

Notary coordination and municipal capital gains tax

When real estate is involved, the inheritance administration typically includes the deed of acceptance and allocation before a notary, plus the subsequent registration at the Land Registry. These steps coordinate with filing Form 650 and, in parallel, with the plusvalía municipal of the city council where each urban property is located.

It is common for heirs to receive a request from the city council months after filing Form 650, because they did not realise that the municipal capital gains tax is processed separately. It should be included in the plan from the outset, together with the foreseeable notary and registry costs.

The logical order we usually recommend is: first, gather all documentation (certificates, valuations, titles); second, calculate and file Form 650 within the 6-month deadline; third, sign the deed of acceptance and allocation when needed for those assets that require it; and fourth, manage the municipal capital gains tax and the registration. Each step depends on the previous one and the deadlines may overlap, so the timeline should be planned with margin.

In practice, we see that delays usually do not lie with the tax authority itself, but with obtaining bank documentation, valuing real estate or coordinating between several heirs living in different places.

How GESTISYD can help

• We assess the case, calculate the tax due and apply the Madrid allowances that fit your situation.
• We prepare and file Form 650 and Form 660 within deadline.
• We coordinate with the notary and the subsequent Land Registry registration of the properties.
• We manage the relevant municipal capital gains tax filing.