Spain’s Inheritance Tax Exemptions Against EU Law

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This topic contains 11 replies, has 6 voices, and was last updated by Profile photo of Anonymous Anonymous 5 years, 7 months ago.

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  • #55809
    Profile photo of Anonymous
    Anonymous
    Participant

    Received this by email. Don’t know the source:

    Spanish resident tax payers are moving towards practically total exemption from inheritance and gift tax (IGT) in transfers to descendents and spouses. These improvements may be soon extended to non-residents. Although IGT legislation is regulated by each Autonomous Community, there has been a general trend towards full or almost full exemption in the last years.

    However, exemptions are not applicable to non-residents, who are charged IGT on their Spanish property at progressive rates ranging from 7.65% to 34%. And this basic rate can increase significantly when the beneficiary’s kinship with the deceased is not close and his pre-existing wealth was high. For example, for a beneficiary whose pre-existing wealth in Spain is in the top bracket, the rate can jump to 40.8 %, even for inheritance from a parent.

    This tax burden is one of the reasons why many non-residents have acquired their properties in Spain, for example many coastal residences or operating companies through off-shore vehicles.

    However, on 5 May the European Commission issued a reasoned opinion that could bring about a landslide change in the Spanish IGT treatment of non-residents – at least for EU residents. According to the press release published by the Commission, it has asked Spain to amend, within two months, the IGT provisions which impose a higher tax burden on non-residents. The Commission also refers to the less favourable treatment of assets held abroad by Spanish residents as compared to assets held in Spain.

    The European Court of Justice declared that the different taxation of capital gains – until 31 December 2006 – for residents and non-residents was contrary to Community Law. Gains obtained by Spanish resident individuals on assets held for more than one year were taxed at a 15% rate, while similar gains obtained by non-residents were subject to a 35% rate. Spain ended this discrimination on 1 January 2007, establishing an 18% tax rate (19% as of 1 January 2010) for all capital gains obtained by individuals, regardless of their residence.

    This change significantly reduced the Spanish tax burden on non-residents owning property in Spain. Furthermore, the gains will not be taxed when the property is transferred mortis causa. The extension of the inheritance and gift tax exemptions to EU residents would further change the Spanish tax landscape for these individuals. No Spanish tax would arise on the transfer of Spanish property to the decedent’s spouse or children.

    Case C-562/07 may also be seen as a precedent of what the Court’s position might be if the matter now raised by the Commission were taken to the ECJ: the different inheritance tax treatment of resident and non-resident individuals could be considered contrary to EU Law. A legal change in the IGT provisions applicable to EU residents in respect of their properties in Spain may be forthcoming.

  • #100356
    Profile photo of Arthur Stuttard
    Arthur Stuttard
    Participant

    Not guilty to sending the email, but guilty to bringing about the review.

  • #100357
    Profile photo of Anonymous
    Anonymous
    Participant

    Thanks, Arthur. You are doing a Sterling Job. We get done when we buy & the same when we die.

  • #101207
    Profile photo of Anonymous
    Anonymous
    Participant

    If this law is changed it will be great help to older people like me who worry that capital taken from UK assets that would not have been chargeable to UK inheritence tax in a Spanish property comes into tax from a very low amount. It will help the Spanish Property market.

  • #101210
    Profile photo of Anonymous
    Anonymous
    Participant

    Please confirm. If the law has been changed or not. My understanding was it has changed from 01/01/10. Thanks in advance

  • #103509
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi,

    Have there been any further developments regarding Inheritance Tax liability? Was at a “This is Spain” exhibition today and a legal company was putting the fear of God into people visiting their stand regarding problems for property owners if a spouse died and the remaining partner wanted to sell-up. Said that tax was astronomical and must be paid before property is sold though when asked, didn’t seem to want to give any percentages payable. They were trying to sell their service of transferring property into a UK listed company to “avoid” said taxes! Thier fees start at 5000 euros for a “standard case”.

  • #103512
    Profile photo of Anonymous
    Anonymous
    Participant

    We look to Arthur to respond.

  • #103897
    Profile photo of Arthur Stuttard
    Arthur Stuttard
    Participant

    No definitive news yet I’m afraid.

  • #103930
    Profile photo of Anonymous
    Anonymous
    Participant

    Hello Arthur. I beleive they have already abolished in Catalunia.

  • #103948
    Profile photo of Anonymous
    Anonymous
    Participant

    @shakeel wrote:

    Hello Arthur. I beleive they have already abolished in Catalunia.

    this intrests me as recently i saw graffitti on a bridge near coloma de farners that read “This is not spain this is Catalunia” i know that they have always wanted independance from the rest of spain in this area but with the rest of spain pulling them down do you think it will strengthen the case and we could see a breakaway and a return to the pisata at some point or is it to late to jump ship now.

  • #103950
    Profile photo of Anonymous
    Anonymous
    Participant

    While I agree with you that Catalonia like many other regions in Basque, Andalucia, etc. The regions in Spain have there own quirks in all & sundry. An aspect that many buyers perhaps over looks.

  • #103955
    Profile photo of Anonymous
    Anonymous
    Participant

    @shakeel wrote:

    While I agree with you that Catalonia like many other regions in Basque, Andalucia, etc. The regions in Spain have there own quirks in all & sundry. An aspect that many buyers perhaps over looks.

    a friend of mine bought a property just outside llorett on the road to tossa he went to night school for a year to learn spanish and when he got there he couldn’t understand alot of the locals so your right many buyers over look local quirks

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