Press Room

April 13, 2018

From Spain: Inheritance and Donation Tax: Spanish Supreme Court Also Recognizes National Tax Benefits to Non-EU Tax Residents

María Olleros, Miguel Ángel Galán or Toni Prat - Andersen Tax & Legal in Spain, a member firm of Andersen Global

The Spanish Supreme's Court Resolution marks a turning point in cross-border inheritance and donations in Spain.

Prior to it, Spanish laws dictated that inheritance and donations involving non-EU tax residents could not benefit from the regional tax incentives applying to Spanish tax residents.

This new pronouncement originally comes from 2014 when the European Court of Justice expressly confirmed that Spanish legislation was restricting the European right to free movement of capital.

In fact, internal rules have stated for years that internal regional tax benefits (also different depending on the Region- Comunidad Autónoma) were only allowed to Spanish Tax Residents but not to non-residents and as a consequence, significant imposition differences were arising depending on the tax payer's residence.

Inheritance and donation law changed almost immediately in November 2014 (applicable in 2015) in order to comply with EU standards. From there on, regional tax benefits could also be applied by EU residents and European Economic Area (EEA) residents but were never recognized to non-EU residents by the Spanish tax authorities nor the tribunals.

The Supreme Court now guarantees that EU principles are fully and formally recognized by Spanish Tax system no matter whether the inheritance or donation involves residents or non residents, either from the EU, EEA or not, and finally allows non-EU Tax residents to benefit from the same tax legislation than Spanish Tax residents and EU Tax residents under the same conditions.

Inheritance and donation tax benefits are especially interesting in Spain for close relatives but may vary slightly depending on the region. This new resolution makes Spain even more attractive to non-residents from an individual tax sight as a door opens to efficient tax planning under the new rules.

It also allows non-EU residents to claim for taxes levied in previous years under certain requirements.