Changes on Spanish Inheritance and Gift Tax

As we reported to our readers, the European Union Court of Justice (ECJ) in its judgment of 3rd September 2014, said that Inheritance and Gift tax rules in Spain are contrary to the principle of free movement of capital,  since EU non-residents in Spain, until now, were always taxed according to the much less beneficial state or national legislation, rather than the favourable and standard tax advantages foreseen in most Autonomous Communities’ (regions)  inheritance and gift tax rules.

This situation of tax discrimination has ended with the said court decision.

Although awaiting final approval, it is known the different proposals aim to allow EU citizens who are non tax resident in Spain, to enjoy the tax advantages of the Spanish Autonomous Communities. Apparently these new rules will be:

Successions and inheritance

In the case of the estate of a Non Tax Resident in Spain, but resident in the Union or the European Economic Area (EEA), the applicable inheritance tax rules for the Spanish Inheritance will be the one of the region or community where the majority of the value of the assets in Spain are situated. If the deceased (not resident in Spain), had previously been resident in a Spanish autonomous community, then the inheritance tax rules of that region will apply.

Gifts and Donations

Real Estate Property situated in Spain: in the case of a donation of a property in Spain to a nonresident in Spain living in the Union, the tax rules of the Community where property is located will apply.

Real Estate Property situated out of Spain: in the case of a gift of properties outside Spain, but in the Union or EEA, to a Spanish tax resident, the rules of the autonomous community where the resident has his/her residency will apply.

Pending the final approval, these changes will result in significant tax benefits for Non Residents, as the provisions of the Autonomous Communities will apply.

In the present situation it is important to know that although the changes have not yet been approved, Non-Residents can enjoy, from now on, the benefits in the Inheritance and Gift tax of Autonomous Communities

For example, if you have the majority of your assets in the Valencia Community or you live here, even if your children are not resident in Spain, they will pay very little inheritance and gift tax, therefore, fiscal engineering to avoid this tax no longer makes sense.

If you want to transfer your property in Spain to your non tax resident family, now a gift or inheritance, can be the cheap and proper way to do it.

On the other hand, if you or someone you know have paid inheritance tax in the last 4 years, send us your documentation and we will study it, we could help you to get the taxes paid returned.

The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.

Written by a CBBA member
Please visit our Members Page to see the current list of CBBA members