08. May 15

ECJ: Inheritance tax in Spain discriminatory – Possible to reclaim inheritance tax

The European Court of Justice (ECJ) has found that Spanish inheritance and gift law unlawfully discriminates against foreigners who are living in Spain on a non-permanent basis.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: On September 3, 2014, the European Court of Justice (ECJ) held (C-127/12) that Spanish inheritance and gift tax law unreasonably disadvantages foreigners living in Spain on a non-permanent basis and contravenes the free movement of capital. The background to this is that heirs living permanently in Spain (residents) can be granted substantial tax reductions by the autonomous communities. However, these special arrangements do not apply to heirs who are living in Spain on a non-permanent basis. The ECJ found this to be a clear case of discrimination.

The ECJ’s latest case law may be of interest to many heirs, for example those who have inherited property in Spain yet do not live there on a permanent basis and accordingly have not been able to benefit from these tax reliefs. It is now possible for them to reclaim a large proportion of the inheritance tax or gift tax paid from the Spanish state. It should be noted here that the tax reliefs vary greatly between the different regions.

The Spanish government has since responded to the ECJ’s ruling, stating that the tax reliefs will also apply to heirs who are not resident in Spain but who live within the EU, Iceland, Liechtenstein or Norway from January 1, 2015. This ought to be taken into account for future inheritances where possible.

As for prior inheritances, it may be possible to reclaim a large proportion of the inheritance or gift tax paid depending on the circumstances. That being said, limitation periods have to be observed here. The limitation period is normally four years following payment of the taxes, but inheritance tax can also potentially be reclaimed in older cases. Those concerned can turn to lawyers who are experienced in the field of tax law to enforce these claims. They are able to examine the claims and take the necessary steps. In the case of the generally very high inheritance taxes in Spain, it can definitely be worthwhile having the claims reviewed.

For more informations: http://www.grprainer.com/en/legal-advice/tax-law/inheritance-tax.html

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