Tax rules are always changing. This article has now been superseded by changes in tax rules in Spain. However, you can get the latest information by downloading the latest version of our Guide to Tax in Spain
Have you paid inheritance tax or gift tax on a bequest or gift where one of the parties was resident outside of Spain?
If so, there is an excellent chance that you may be able to reclaim the majority of the tax paid on the bequest or gift. A European Court of Justice ruling on the 3rd September 2014 has confirmed that Spain and Germany were discriminating against non residents who lived in another country in the European Free Trade Area (EU members plus Iceland, Liechtenstein, Norway and Switzerland).
The ruling enforces legislation that was enacted in 2010. The Spanish Government submitted draft legislation to comply with the ruling on the 30th September 2014 paving the way for two actions:
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The ability to make a reclaim if tax based on the “National” rates of tax has been paid on a death or gift that occurred in the last four years.
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The ability to base all calculations of Inheritance tax and gift tax using the new rules with immediate effect even though the legislation is not yet completed. It appears this is because there is an acceptance that if the old rules were still applied it would simply result in a reclaim the day after payment.
Why does the European Court of Justice ruling of 3rd September make a difference?
The ruling means that gifts or bequests with a non resident party must be treated in a manner identical to if the person was resident. This means that the tax rates applicable are the relevant Autonomous Communities (AC) rates, many of which include generous discounts and exemptions by comparison to the National Rate. Here are two practical examples of the amount of tax that can be saved:
Bequest from Non resident Father to Daughter resident in Spain of 200,000€. Tax under National Rates, 52,400€. Tax under AC rates 201€. Reclaim Amount 52,199€
Bequest from Spanish resident father to non resident daughter of 2,000,000€. Tax under National Rates 723,236€. Tax under AC rates 7,230€. Reclaim Amount 716,006€
Each case will be different. Where the parties live, whether it is a bequest or a gift, the total value involved, the existing wealth of the recipient all make a difference. As a consequence we work with a specialist, English Speaking tax lawyer to ensure the reclaim is submitted properly.
If you, or someone you know, has paid Spanish Inheritance Tax or Gift Tax on a Death or Gift within the last four years, contact the author of this article Barry Davys