Please note that this article is over two years old! While some of the content is still relevant we have written more recently on the subject of Spanish inheritance tax. Most recently we covered the position for non EU residents who may be entitled to refunds of Spanish inheritance and gift tax here and here. We also wrote about the impact of the ECJ ruling we set out below upon EU residents who may be entitled to refunds of Spanish inheritance tax here.
We have a wealth of information about Spanish inheritance tax available on our website. Including a video guide to Spanish tax and a general guide to Spanish inheritance tax here. You can also subscribe to our mailing list below to be kept up to date about matters relating to Spanish inheritance tax.
The European Court of Justice (ECJ) has taken a bold step in ruling that Spain’s current inheritance tax rules for non-residents are void for being discriminatory.
Prior to the ECJ’s decision, non-residents often found themselves liable to pay more in inheritance tax to the Spanish authorities than their resident counterparts.
The ECJ ruling follows on from a formal request from the European Commission in 2010 for Spain to end its discriminatory Inheritance Tax practices, as they went against EU non-discriminatory provisions.
Spain’s defence to the Commission’s claim focused on absolving blame from central government for such discriminatory practices and instead shifting the burden onto its regional autonomous counterparts.
But who is really to blame for these long standing Inheritance Tax discrepancies?
For years, non-residents liable to pay inheritance tax to the Spanish authorities have done so at a rate set by central government, to the central government. Meanwhile, all Spanish residents liable to the tax have had to answer to the regional government of the autonomous community in which they reside.
It just so happens that those regional governments have opted to offer tax relief options to residents to reduce their tax liability for gifts and inheritance tax, in some cases to almost zero.
Spain’s central government would have you believe that regional governments openly deny these tax relief options to non-residents. And on the face of it, that seems to be the case. But the reality is a different matter. Regional governments are not in a position to deny non-residents these tax reliefs for the simple reason that central government has not transferred to the regional governments jurisdiction over the liability of non-residents to inheritance tax.
The consequence of the ECJ ruling is that Spanish inheritance tax rules for non-residents have been left in a precarious position, because as it stands, they are no longer applicable within the law. It may even be the case that those who have already paid over the odds in inheritance tax may be able to get their money back. Only time will tell.
What is as yet very unclear during this interim period is that no tax liability for non-residents will exist, so those looking to inherit should proceed with caution.
With all eyes on Spain and how it responds to the ruling, now more than ever, it is essential for non-residents to seek independent legal advice for their inheritance tax matters.
Please note that this article is over two years old! While some of the content is still relevant we have written more recently on the subject of Spanish inheritance tax. Most recently we covered the position for non EU residents who may be entitled to refunds of Spanish inheritance and gift tax here and here. We also wrote about the impact of the ECJ ruling we set out below upon EU residents who may be entitled to refunds of Spanish inheritance tax here.
We have a wealth of information about Spanish inheritance tax available on our website. Including a video guide to Spanish tax and a general guide to Spanish inheritance tax here. You can also subscribe to our mailing list below to be kept up to date about matters relating to Spanish inheritance tax.
