The decision is the culmination of a long-running battle between Spain and the EU, which ordered Spain to change the practice of charging higher inheritance rates to nonresidents in 2010. But Spain refused to comply, and the case was referred to the courts.
In the wake of the ruling, Spain’s government is looking at how to bring legislation in line with the ruling, a source at the Treasury Ministry told Reuters.
This is a major issue for both foreigners and Spain’s economy. By some estimates, 14 per cent of Spain’s population is foreign nationals, one of the highest percentages in the EU.
The issue is complex. National legislation doesn’t make a distinction between residents and nonresidents, but the inheritance taxes are applied by regional governments. The tax policies vary between regions. But in the Balearic islands, for example, locals may pay about 1 per cent while foreigners might pay anywhere from 7 to 34 per cent, the Wall Street Journal reports, citing data from DMS Consulting.
The Journal also published one man’s experience with the tax, under the headline, “Inheriting Trouble: Spain’s Tax Almost Drove Me From the Country.”