The Spanish Inheritance and Donation Tax discriminates the Non Residents


Property Law and Tax Issues

The past 3rd September was issued the sentence from the Court of Justice of the European Union (TJUE) in which is considered that the Spanish Inheritance and Donation Tax is contrary to the free circulation of capital and is an important discrimination between the residents and the non residents. In order to understand it better we should begin from the basis that the Inheritance and Donation Tax in Spain is applicable to all the nacional territory, with exception to the Basque country and Navarro who hold their own tax system, but also and most importat is that the Autonomous Regions can offer tax benefits to its residents. Whereby the first difference we find between the Spanish citizens themselves is that, depending on which Autonomous Region they live in, at the moment of receiving an inheritance or donation they will see how the tax rate varies enormously from one region to another. But the non residents come off worse as they cannot take advantage from the autonomous tax benefit and in some cases have to pay tax up to a rate of 34%, whilst in the specific case of the Balearic Islands this is 1%. The Spanish Inheritance and Donation Tax discriminates the Non Residents. The denouncement was made by the European Commission in 2011 after detecting that the taxation of the Inheritance and Donation tax in Spain was not in accordance to European Regulations and in particular because it violates, as we have mentioned, the free circulation of capital. The consequences of the sentence are still not very clear due to its recent verdict but it gives forth two questions to be kept in mind:
  • •  The Spanish Government must clarify if the reform they have planned for 2016 concerning transferible taxes together with the new form of authomous finance will be brought forward after the sentence of the TJUE. This being the case it is probable that a shower of donations will take place prior to the entry in force.
  • •  The Spanish Inland Revenue Office must inform of the actions that should be made for the rebate of undue payments.
Our lawyers offices, both in Mallorca as well as in Ibiza, attend to a large number of non residents with properties on the islands who will be benefitted tax wise at the moment of offering or receiving their property in inheritance or in the case of wishing to donate same. We will await the decisions of the Government and Spanish Inland Revenue office in order to offer to our non resident clients our legal services for the possible reclaim of the tax payment. Important entries of legal matters in Mallorca and in Ibiza: Planning Law and Use of Land (LOUS). Draft of the Agricultural Law. Modification of the Coastal Law.

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