Spain infringing EU Law
On the 3rd of September of 2014 the Court of Justice of the European Union ruled Spanish law on Inheritance and gift tax was breaching EU Law (case C-127/12). It should be possible for non residents to claim back the overpaid amounts regarding inheritance and gift tax paid in Spain.
In October 2011, the European Commission decided to refer Spain to the EU's Court of Justice for discriminatory rules on Spanish inheritance and gift tax that require non-residents to pay higher taxes than residents.
For example, a resident of any EU member State inherits a house valued at 600.000€ from his father residing in Barcelona. As the son is not a Spanish tax resident, he would pay 99.296€ whereas if he were a Spanish tax resident he would have paid no inheritance tax. In this case, we would expect the son of the person residing in Barcelona to be refunded 99.296€.
Inheritance and gift tax in Spain are regulated at both State level and at regional level (level of the Autonomous Communities). Several Autonomous Communities' legislation grants residents a number of tax benefits that, in practice, allow them to pay much lower taxes than non-residents.
The ruling of the Court
On the 3rd of September of 2014 the Court of Justice of the European Union ruled Spanish law on Inheritance and gift tax was breaching EU Law. Spain was expected to be found to be at fault because of well established EU case law (Barbier (C-364/01), Eckelkamp (C-11/07), Arens-Sikken (C-43/07), Mattner (C-510/08) and Ivon Welte (C-181/12)).
Another reason is because the ruling would be in line with Regulation No 650/2012 (Brussels IV), which is designed to facilitate the free movement of persons within the EU. Brussels IV shall allow persons concerned by cross-border successions to choose the law and jurisdiction applicable to the inheritance. The Regulation shall enter into force on the 17th August 2015 but it shall not have any effect on inheritance tax.
Effects of the ruling
It should be possible for non residents who have paid inheritance and gift tax in Spain to file a claim in order to be refunded the overpaid amounts. In any case, before filing a claim, it is important to plan the consequences of being refunded these amounts, for example, regarding the taxes due in the country of residence of the tax payer.
Spanish legal time limits prevent claims being made after four years from the tax payment date. However, time-excluded claimants may file a claim for patrimonial responsibility against the Spanish State.
Our local member, TGS Edisa, is helping individuals determine their rights according to this ruling.
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