Inheritance Tax in Spain ruled incompatible with EU rules

18 September 2014

On September 3 2014, after a 3 year procedure, the European Union Court of Justice (ECJ) ruled that Spanish inheritance and gift tax is incompatible with EU rules, as it imposes a higher tax burden on non-residents than residents.

Until now, Spanish legislation has allowed differences in the tax treatments of gifts and inheritances between resident and non-resident beneficiaries.  Devolved powers given to regional governments (Comunidad Autónoma) allowed each region to establish reductions that are applicable only to Spanish residents. Non-residents, on the other hand, are not able to apply for the regional legislation because they are subject to state law at a national level which does not allow for reductions.

As a consequence, the Court has ruled that the Spanish legislation constitutes a restriction to the free movement of capital. Spain has been told to amend the legislation and comply with the ruling. This could lead to non-residents who have paid the Spanish inheritance and gift tax requesting a reimbursement of the paid excess. They will only be allowed to ask for the reimbursement of the not prescribed tax years

Our Spanish firm, UHY Fay & Co, has launched a  team to advise non-residents about how to recover the taxes.

If you think you may have be affected by this ruling, please contact one of our international tax experts or contact the author of this article, Jordi Vilardell Casas, Tax Partner at UHY Fay & Co Barcelona on