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This article is part of our guide Inheritance in Spain with a non-resident, expat or foreigner which you will find in our Inheritance in Spain section.
The Spanish regulations regarding the taxes derived from an inheritance process in Spain have undergone various modifications in recent years. The most important milestones are detailed below.
The original law
Inheritance and Gift Tax is regulated by Law 29/1987 of 18 December 1987 on Inheritance and Gift Tax. In simplified terms, this tax is called ISD.
The 2014 ruling of the Court of Justice of the European Union
In the case of applying Spanish rules, until the end of 2014, in all inheritances and donations with non-residents, ISD had to be paid to the State and applying state rules (up to 34%). They were not allowed to apply regional tax benefits.
This was extremely unfair in many cases. For example, a parent resident in Madrid died with a child resident in Spain who could pay in Madrid with a 99% rebate, and with another child resident in Germany or the USA who was obliged to pay much more.
Following a complaint by the European Commission, the European Court of Justice ruled on 3/9/2014 that this discrimination violated EU law and specifically the free movement of capital.
This important ruling of the CJEU forced the immediate modification of the regulations at the end of 2014, through Law 26/2014, which ruled that non-residents in Spain could apply the regional tax benefits if they were resident in another EU or European Economic Area country.
Non-EU foreigners
Non-EU foreigners were initially left out of this benefit, until in 2018 the Supreme Court, in accordance with CJEU case law on the scope of the principle of free movement of capital enshrined in Article 63 of the Treaty on the Functioning of the European Union, ruled that the effects of the CJEU ruling of 3 September 2014, were also applicable to residents in non-EU countries.
Therefore, the regime regulated in said additional provision will be applicable in relation to all non-residents, regardless of whether they reside in a Member State of the European Union or of the European Economic Area or in a third country.
Latest amendments
Despite being laws of general application, changes in the applicable legislation are common, such as the recent change in the calculation of the taxable base for wealth taxes which we discussed in our article “The new anti-fraud law in Spain: Property taxation” or the change on lifetime inheritance which we discussed in “The new anti-fraud law in Spain: Inheritance during lifetime“. Therefore, it is always advisable to have the legal advice of a good law firm to achieve the best result in this type of proceedings.
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