The New Spanish Inheritance Tax and Gift Tax Law in Spain intends to equalize the taxes paid by residents and non-residents. The Judgment made by the European Court of Justice on 3rd September 2014 implies a major change regarding the equality of the treatment of non residents and residents in matters of succession and gift taxes.
Before the introduction of this new regulation, non-residents who inherited a property in Spain were taxed heavily as they were not considered eligible to receive the benefits applied to residents.
This new regulation forces Spain to eliminate this difference, and does not allow discrimination of non residents in this situation. The European Court considers that the treatment of non-residents and residents was one-sided and unfair. The European Union asserts that the fundamental principle of free movement of capital between member states had been breached by this discriminatory treatment. Therefore, they deemed it necessary to modify the law in order to rectify the situation regarding Inheritance and Gift Law.
The new Spanish Inheritance Tax Law
The new Law means that non-residents will now benefit from all of the allowances previously only given to residents. This means that if you inherit a property in Spain, in the future, you as a non-resident will be required to pay only a minimal amount for Inheritance tax or, in some cases, nothing.
The limit to be considered exempt from paying tax is 175,000 euro. This amount is reached taking into account a series of criteria, including, amongst others, the value of the property inherited. (Please note that each case is different, and there are exceptions).
This change is a major step towards the total inclusion of non-residents into the Spanish society. Every day more and more foreigners choose Spain as their base. It was a logical and wise decision for Europe to take this stance to equalize the fiscal situation and to eliminate any distinctions made between residents and non-residents in this country.
If you find yourself implicated in any of the aforementioned issues please do not hesitate to contact us, or if you simply have doubts or questions we will be happy to arrange a free, no obligation appointment to resolve your queries.
Senior partner Madrid office