• CIC - Media Team

EUROPEAN COURT OF JUSTICE says SPANISH INHERITANCE & GIFT TAX contravenes EU Law.


The European Court of Justice declared earlier this month that the Inheritance & Gift Tax in Spain violates EU law by allowing differences of treatment between residents and non-residents and obliging non-residents to pay more than residents, because only those can benefit from the tax advantages and deductions granted by the autonomous Spanish regions.

The Court thus rules in favour of the European Commission, which brought the case before the ECJ in 2012 considering that such discrimination in the Spanish tax constitutes a restriction on freedom of movement of capital.


In Spain, the Inheritance and tax is a state tax, but the responsibility to collect, administrate and establish their own rates, allowances and tax benefits has long been transferred to the different regions. Most of them have established reductions and deductions applicable to their own residents.   But residents in another state have been compelled to pay the tax according to the State tax scale, normally higher than the tax scale current in most regions.


The judgement emphasizes that the benefits from tax reductions only apply in the case of connection with the territory of the autonomous regions and failing such point of connection non-residents must bear a greater tax burden, which reduces the value of the inheritance or the gift.

According to the Court’s jurisprudence such a situation implies restriction to the free movement of capital – one of the pillars of the European construction.


The European Court concludes saying that “the Kingdom of Spain has failed to comply with its obligations under article 63 of the Treaty and 40 of the Agreement on the European Economic Space of 2nd May 1992, by allowing different a tax treatment of inheritances and gifts according to the place of residency.

The judgement – no appeal is possible – is mandatory for Spain. An immediate consequence is that the law must be changed in order to avoid such discrimination in the future. But that could take time, because changing the current framework to comply with the verdict is very complex: an obvious solution, which would be to homogenize the Inheritance tax throughout the Spanish territory (it is applicable in all regions except Navarre and the Basque Country) would significantly reduce the current regulatory powers of the autonomous regions.

Another kind of changes aimed at avoiding the discrimination of non-residents might lead to Spanish residents living in regions with less tax benefits or none at all, to feel ill-treated as compared to non-residents.


Though the verdict does not contain any reference to possible claims for tax amounts already paid as non-residents, a Google search under “Spanish inheritance tax reclaim” will result in quite a few sites offering their services in that respect.

As far as we in the Canaries are concerned, there is hardly any difference presently with the state tax scale, most benefits and reductions that had been introduced as from 2008 having been suppressed in June 2012 due to the economic and financial crisis.

In the future the trend should be again to suppress the Inheritance Tax altogether – that might have been the case already but for the crisis and the financiering needs of the public administrations.



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