European Court Rules Against Spain In Discrimination Of Non-Resident Inheritance Tax
Spain News
Published: 03 September 2014 12:02 CET
Updated: 20 December 2019 13:02 CET
The European Court of Justice finally ruled against Spain on Wednesday in the long running saga concerning inheritance tax and non-residents.
It's thought that around 60,000 non-residents in Spain have in the past been hit with inheritance tax bills totalling some €500 million.
At present residents pay around 1% in inheritance tax compared to non-residents who can be hit with bills of anywhere up to 35%.
Inheritance tax (Impuesto sobre Sucesiones y Donaciones (ISD)) can be quite a complex issue in Spain due to the way the tax is collected and managed by each of the regional governments.
In many of the regions, inheritance taxes for locals are near zero compared to those of non-residents who have to pay the seemingly extortionate amounts levied on them.
The European Commission believe that the taxes imposed on non-residents to be unfair, contrary to freedom of capital movement within the EU and violates European treaties.
The case was first brought to the European Courts of Justice by the European Commision back in 2010 after Spain failed to comply with initial requests to change the legislation.
Although Spain must comply with the ruling, it's not clear when the changes will be written into Spanish legislation. The ruling may also mean that many expats wrongly hit by IHT bills in the past, could be inline to recoup their losses.
Inheritance tax on non-residents has obviously been very lucrative in the past.
It will come as a big blow for Spain, where around 14 million of its 46 million population are foreigners.
Conveniently for the Spanish government though, there is a legal maximum four year time limit from the date of the payment, for claimants to make a claim. This could result in many people missing the deadline and being unable to pursue any claims.
