EU Commission Refers Spanish Inheritance Tax Laws EU Court

 

The European Commission has once again swooped on Spain and it's legal and procedural practices and determined that it is acting in a discriminatory fashion towards non-residents.

In this particular case the commission was investigating the matter of Inheritance Tax and gift tax rules, and considered that the current regulations constitute 'an obstacle to the free movement of persons and capital in breach of the Treaty on the Functioning of the European Union', and as a result made the decision to refer Spain to the EU Court of Justice for discriminatory tax rules that require non-residents to pay higher taxes.

Inheritance Tax and gift tax in Spain is regulated by both the Central and Regional Governments, and rules instituted by the latter are applicable only to resident individuals and lead (in practice) to a substantially lower tax burden for resident taxpayers.

Those who are not resident in Spain are subject to this tax with regard to any assets which are located in Spain or rights which may be exercised in Spain and are ruled only by state law. Contrary to autonomous communities' legislation, state law does not grant certain tax benefits, leading to higher taxation for non-resident individuals.

If the EU Court of Justice rules that this practice is discriminatory, Spain would be obliged to modify them and non-residents would be entitled to a refund of the excessive tax paid.

As such, it would be beneficial for non-residents to apply, through the appropriate tax procedure, for a refund of the undue payments made within the past four years in order to interrupt prescription of the Inheritance Tax and gift tax debts.