Posted by & filed under Non-residents of Spain, Tax advice, Wills and inheritance in Spain.

On Wednesday 3 September 2014, The European Court of Justice declared Spain’s “discriminatory” inheritance law illegal according to EU law.

The Court ruled that inheritance tax in Spain and gift tax laws are discriminatory in cases where the deceased or the giver, the inheritor or the recipient are not Spanish residents, and also when the bequeathed or donated assets are situated abroad. Spain has six months to change its law and the changes should come in by January 2016 at the latest.

Discrepancies between Resident and Non-resident Inheritance Tax in Spain

It all comes down to the differences in the complicated way Spain processes resident and non-resident inheritance taxes. Taxes on a resident’s estate are paid to the government of the autonomous region where the deceased resided. Each of Spain’s 17 autonomous communities is free to amend the State rules to set its own fiscal reductions on inheritance tax in Spain.

On the other hand, non-resident inheritance and gift tax is handled by the Spanish State. Non-resident inheritors or recipients of a donation are unable to benefit from the autonomous communities’ tax reductions enjoyed by residents.

As a result of this discrepancy, the difference between the inheritance tax charged to residents and non-residents can be enormous. For example, in Andalusia the spouse or offspring of the deceased may inherit up to €175,000 tax-free. Compare this to the State’s general tax-free allowance of €16,000 for inheriting spouses or children.

Tax Refund

The European Court’s decision means that non-residents who have paid inheritance or gift tax during the past four years can now claim back the difference between the tax they paid, and the amount they would have paid had it been calculated according to the relevant autonomous community’s tax regulations. The Spanish treasury may also be obliged to pay interest of 15% – 20% on the amount due.

How to Claim: Why choose Andalucía Lawyers?

The Spanish treasury is out to lose a lot of money with this imposed law change, as a result the claims process will be far from easy. We are talking about a complicated legal process with a lot of paperwork, all of which must be perfect. There is no case law yet to follow so each claim will be judged independently. There is a time limit on claims; you have only five years to make a claim from the time of the inheritance. All of this taking into consideration that you can only apply for a refund once.

You need an experienced tax expert with specialised knowledge and impeccable attention to detail who understands both Spanish inheritance tax law and the EU rules. Contact us to arrange a consultation in one of our offices in Granada or Marbella, or over email or telephone, to discuss how the European Court’s ruling could apply to your situation.

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