The rules determining the inheritance and gift tax to be paid in Spain have changed for non residents, finally.
This change, outlined under the recent Law 26/2014, of November 27th, amending the Law 29/1987, of Inheritance and Gift Tax, is a direct consequence of the European Court of Justice court decision of 3rd September 2014 (Case C-127/12, see our previous articles). This court ruling concluded that the regulation of inheritance and gift tax in Spain discriminated against non tax residents, since the autonomous communities taxes (which provide many more tax benefits), could not be applied to them, with the more severe National rates being applied instead.
This modification is effective from the 1st of January 2015.
For clarification, please note that when we refer in this article "Not resident in Spain", we mean not tax residents in Spain but residents in a Country member of the European Union or European Economic Area.
Therefore, from now on, the applicable inheritance and gift tax will be:
Inheritance cases:
a) If the deceased was non tax resident in Spain, the beneficiaries (heirs, etc.) shall be entitled to apply for the inheritance tax of the Autonomous Community where the greatest value of Spanish assets of the inheritance are located.
If there were no assets in Spain, then the tax rules of the Community where the beneficiary lives shall apply.
b) If the deceased was resident in Spain (in one region / Community), the beneficiaries of the estate who are not resident in Spain are entitled to the application of the tax law for that region.
Gift and donations:
a) In the case of a donation of immovable property situated in Spain, the beneficiaries not resident in Spain are entitled to the application of the tax regulations of the Community where these properties are.
b) In the case of donation of property located in a Country member of the European Union or the European Economic Area, the taxpayers resident in Spain are entitled to the application of tax grants from the community where they reside.
This change dramatically reduces the inheritance and gift bills when one of the parties is not tax resident in Spain, especially if beneficiaries are the spouse, descendants or ascendants.
Source: Round Town News