Spain’s New Inheritance Tax Law for Non-Residents of Spain
Spain has responded to the European Court of Justice’s ruling of 3 September 2014 condemning Spain’s inheritance law as “discriminatory” against non-residents of Spain.
On 27 November 2014, Spain’s new inheritance tax law was passed. Read on to learn about these recent changes to Spanish inheritance tax rules and how they could affect you.
Spain’s Previous Inheritance Tax Law
Under the previous Spanish inheritance tax law, each of Spain’s 17 autonomous communities was free to amend the State rules, thus setting its own particular fiscal reductions on Spanish inheritance tax. However, these tax reductions were only applicable to Spanish residents. Non-residents of Spain were subject to the Spanish State’s much less favourable inheritance tax rates. This resulted in discrepancies, at times very large, between the inheritance tax residents and non-residents of Spain were liable to pay.
Read Andalucía Lawyers’ article The EU Court Rules that Non-Resident Inheritance Tax in Spain Is Illegal to find out more about the ECJ’s ruling and its implications.
Spain’s New Inheritance Tax Law
Coming into effect on 1 January 2015, Spain’s new inheritance tax law includes four important changes:
- If the deceased was a Spanish resident and the beneficiary is a non-Spanish resident, but an EU or EEA national, the beneficiary will be obliged to pay inheritance tax according to the tax rates of the autonomous community in which the deceased resided.
- If the deceased was a non-resident of Spain living in the EU or EEA with assets in Spain, the beneficiary will pay inheritance tax according to the tax rates of the autonomous community where the deceased’s highest valued assets in Spain are located.
- If an EU or EEA national who is a non-resident of Spain acquires property in Spain as a gift or inter vivos gift, the beneficiary will pay tax according to the inheritance tax laws of the autonomous community where the property is located.
- If a Spanish resident acquires property in a Member State outside of Spain as a gift or inter vivos gift, then the beneficiary will pay tax according to the inheritance tax laws of the autonomous community where they reside.
Am I a Spanish resident?
You are considered a Spanish tax resident if:
- You spend a total of 183 days a year in Spain.
- Your “centre of vital interests” is in Spain. In other words, if your spouse is a Spanish resident and you’re not legally separated, you’re considered a Spanish resident.
Determining Place of Residence for Spanish Inheritance Tax
Place of residence in Spain is considered to be the autonomous community where the deceased lived for the longest period of time during the five years prior to their passing.
Obtaining a Tax Refund
Non-residents of Spain who are EU or EEA nationals and have paid the “discriminatory” Spanish inheritance or gift tax during the past four years now have the option of applying for a tax rebate. This involves claiming 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, as determined by Spain’s new inheritance tax law. The Spanish treasury may also be obliged to pay interest of 15% – 20% on the amount due.
However, there is a time limit on claims; you have only five years to make a claim from the time of the inheritance. Furthermore, you can only apply for a refund once.
If you think you may be affected by these changes to Spain’s inheritance tax law, it is essential you consult an experienced Spanish tax expert. Contact us at Andalucía Lawyers to arrange an in-person consultation in one of our offices in Granada or Marbella, over email or telephone, to discuss how Spain’s new inheritance tax law could apply to your situation.