When an individual inherits assets located in Spain they are required to pay inheritance tax on the amount they have inherited. Up until very recently non-residents of Spain often found themselves paying more in Spanish inheritance tax than those who were resident in the country – even if the amount they were inheriting was the same.
The good news is that due to recent changes to Spanish inheritance tax law, if you have paid Spanish inheritance tax in the past four years and either you, or the person from whom you inherited, were non-residents of Spain at the time you inherited, then you could be eligible for a full or partial refund from the Spanish tax authorities.
Spanish inheritance tax - Changes to the law
On 3 September 2014, the European Court of Justice (ECJ) held that Spain was not acting in the spirit of the European Union by charging different rates of inheritance tax for residents and non-residents.
A new inheritance tax law amending the Spanish law 29/1987, passed on 27 November 2014, makes clear the tax liabilities now faced by residents and non-residents alike.
Under the old system, each of Spain’s 17 autonomous communities had the power to set their own inheritance tax rates and reliefs. But this was applicable to residents only.
Often the rates set by these autonomous communities would directly contradict the (less favourable) inheritance tax rates and reliefs set by Spain’s central government for non-residents.
The new law, that came into force on 1 January 2015, stipulates that the level of inheritance tax payable both by Spanish nationals and by nationals of EU and EEA States will be determined by the autonomous region of Spain in which the majority of the deceased’s Spanish estate is held (if he or she was a non-resident), or where the deceased resided (if he or she was a Spanish resident).
The new law makes four important amendments clarifying the government’s stance on inheritance tax. They are:
- In cases where the deceased was a resident in Spain and the beneficiary is a non-resident there, but is an EU or EEA national, the beneficiary will pay tax according to the tax rules in the autonomous community in which the deceased was resident.
- In cases where the deceased was a non-resident of Spain, but resident in EU or EEA, and had assets in the country, the beneficiary will pay tax according to the rules of the autonomous community where the greatest value of the assets and rights that form part of the Spanish estate are situated.
- If an individual is a non-resident in Spain, but he or she is an EU or EEA national who has received real estate in Spain by way of a gift or a lifetime transfer not for value, then that individual will pay tax according to the rules of the autonomous community in which the real estate is situated.
- If an individual is resident in Spain and he or she acquired real estate situated in a Member State other than Spain, either by way of a gift or lifetime transfer not for value, then that individual will pay tax according to the rules of the autonomous community in which he or she resides.
Changes to Spanish inheritance tax law - What this means for you
If you paid Spanish inheritance tax between 1 January 2011 and 1 January 2015* and at the time of inheriting you were a non-resident of Spain, but are a national of a State within the EU or the EEA, or the person whose estate you have inherited was not a Spanish resident, but was resident in the EU or the EEA, then you may have paid too much tax.
If it is found that you have paid excessive Spanish inheritance tax then you could be eligible for a full or partial rebate of the inheritance tax you paid, payable to you by the Spanish tax authorities.
* Unfortunately, as the law stands it is unlikely that cases pre-dating 2011 will be eligible for this remedy.
Spanish inheritance tax reclaims - how is the refund calculated?
If you are eligible for a refund then the amount you will receive will depend on the tax rate of the autonomous region that would have been applicable to you or the deceased – whether the asset was inherited or gifted.
Once the correct tax rate has been established, your refund will be the difference between the tax that you have already paid and the tax that you should have paid. In some autonomous regions certain beneficiaries can expect to pay inheritance tax at a rate of 0%. This means that you could potentially receive up to 100% of the tax you have already paid.
How E&G Solicitors in Spain can help you reclaim Spanish inheritance tax
If you believe that you have been directly affected by discriminatory Spanish inheritance taxes and are unsure whether you have a rebate claim, then E&G Solicitors in Spain can help you.
Without making any charge to you we can calculate the amount you may be able to reclaim and, if it is found that you are eligible for a refund of Spanish inheritance tax, we can make an application on your behalf to the Spanish tax authorities on a no win no fee basis.