Potential rebate of tax on inheritance and donations for non-residents

Application of the tax on inheritance and donations (hereinafter ISD) bears a number of difficulties which essentially lie in establishing the legislation applicable to every mortis causa transfer.

Indeed, since this is a tax the legislative application of which depends on the autonomous communities (CCAA) with regard to issues such as reductions and allowances applicable to the tax amount, the place of residence of the testator does lead to distinct interpretations.

Without going into a personal analysis of the various regulations between CCAA, it is necessary to point out that, by and large, the situation could lead to clear taxation differences.

Moreover, if the tax residence of the testator is outside the Spanish territory, the national regulation would be applicable to the inheritance which generally is more burdensome than any of the autonomous regional regulations.

Along these lines, the European Court of Justice entered a judgment that was mandatory for Spain considering that the current system was not in line with EU regulations and violated one of the basic principles of the EU: free movement of capital. As a result, the State is required to adapt the regulation applicable to EU residents to make it comparable to that for Spanish residents.

Therefore, it is advisable to check on all operations subject to the ISD where fiscal treatment received by the taxpayer compelled to make payment may have been discriminatory compared to the system applicable to a Spanish resident.

 

It is necessary to bear in mind generally that the period for applying for a rebate of undue taxes paid out owing to excess payment of instalments is four years; however, if this period has elapsed, a claim may be lodged for pecuniary liability against the State within one year following publication of the judgment referred