Following the judgement by the EU Court of Justice on the 3rd September 2014 the way in which Non- Residents were treated for Inheritance Tax was dramatically changed.
Until this judgement was made, citizens of the European Union were taxed in Spain for inheritance tax according to the relevant state law, without being able to apply the regulated reductions applicable in the tax payable calculations prevalent in the autonomous community where the deceased was residing when they passed away or where their properties, assets and rights were located which were then passed on to their beneficiaries.
Additionally, those living in Spain who received assets or rights located overseas, either by inheritance or donation, were also taxed in Spain in accordance with a tax treatment which was discriminatory in comparison to the way in which non-residents were taxed.
The Court declared that this inequality was contrary to European Community law and thus enabled those EU citizens who had paid taxes under this unfair framework to claim back the excess tax paid.
Who qualifies to make a claim for a refund?
Non-resident taxpayers who are citizens of the European Union may claim back in any of the following cases:
- When the claimant is resident in Spanish territory and has non-resident heirs who were taxed in Spain by the application of state regulations.
- When there were donations of property or other assets located in Spain made to non-residents.
In addition, Resident taxpayers may claim a refund in the following cases:
- When the deceased was not resident in Spain, and their Spanish heirs were taxed under the State regulations.
- When there was a donation of property or other assets located outside of Spain in favor of a Spanish resident.
How can the Inheritance Tax be claimed back?
There are two possible ways to reclaim the excess tax paid:
- Rectification of tax returns, applying appropriate reductions and regional bonuses and requesting the refund of the resulting excess tax paid plus default interest backdated to when the tax was paid, up to a maximum of the previous four years (period of prescription).
And if the tax was paid prior to this four year period they may make a claim for damages against the state, demanding compensation for damages for having levied the tax which does not conform to European Community law standards.
Recently the timescale for making a claim was changed. It used to be that the claim needed to be made by the 31st December 2014. But this time limit has now been lifted and claims can be made indefinitely.
So if you or anyone that you know paid inheritance tax prior to 31st December 2014 and feel that you may have been discriminated against in this way, then do not hesitate to contact us. We will check if you have a valid claim and guide you through the process.