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Spanish inheritance and gift tax refunds

Those who follow Spanish legal developments will be aware that some time ago the Spanish authorities were deemed by the EU to be discriminating against EU residents by applying different rules in relation to inheritance tax for Spanish residents as opposed to residents of other EU member states.  We wrote about it here.  

The ruling led to a significant number of claims by EU nationals for refunds of inheritance tax paid in Spain in the four years prior to the ruling.  

The wheels of justice in Spain turn slowly and a recent ruling of the Supreme Court has now held that the inheritance and gift tax system in Spain has discriminated again, this time against non EU and non EEA residents.  We published a detailed analysis here, but what does it mean for you? 

What does the new ruling on Spanish inheritance and gift tax say? 

The ruling came about as the result of a number of claims by residents of what we can call “third countries” (countries not members of the EU or the EEA), that in taxing them differently to EU residents, the Spanish tax rules violated the principle of free movement of capital both within the EU and between the EU and “third countries.”  

Essentially it was decided that residents of “third countries” are entitled to be taxed in inheritance and gift matters in the same way as if they were EU or EEA residents.  A number of similar decisions of the Spanish Supreme Court followed and it was left to the Spanish Tax Agency to implement a solution.  

What is the solution? 

In a surprising move, the Spanish Treasury acted without being compelled to do so and endorsed the position of the Spanish Supreme Court.  As a result, the Spanish Tax Agency has devised a route whereby those who consider that they overpaid Spanish inheritance or gift tax within the four years of the ruling can claim a refund of the tax paid in Spain, together with interest accrued in the time since it was paid.  

How could Brexit affect the position? 

The good news is that Brits, who are represented in Spain in huge numbers, will not be disadvantaged by Brexit.  In fact this ruling provides a certain element of protection in that,at the end of the transition period, Brits who own assets in Spain can be sure that according to the current position, upon their death their family members will not be obliged to pay a higher rate of Spanish inheritance tax than EU residents.  

How do I claim a refund of inheritance or gift tax paid in Spain? 

In true Spanish style, a number of documents are needed.  All of the documentation evidencing the payment of the tax will need to be submitted to the Spanish Tax Agency in the correct form.  The Spanish Tax Agency will consider your application and decide whether a refund is due.  In the event that it considers you are entitled to receive a refund of inheritance or gift tax, you will receive a payment together with interest, but you will need to be patient to receive the funds. 

You will note that the Spanish Tax Agency does not oblige itself to meet any deadlines for the consideration of your documentation or the payment of your refund.  You can be sure that the process will take some considerable time.  

In order to avoid unnecessary delays it will be important that your documentation is prepared and submitted in the correct format.  This is a service that we are able to offer to our clients.  

What are the next steps if I want to claim a refund of inheritance or gift tax paid in Spain? 

If you have paid inheritance or gift tax in Spain in the past four years and you were not a resident of Spain, an EU member state, or an EEA member state at the time, then you may be able to claim a refund of the tax paid, together with interest.  

Please contact us for assistance.  You can reach us by telephone on 020 3478 1420, by email at info@solicitorsinspain.com or by completing our contact form.

Last updated: 26 June 2020

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