Spanish Inheritancs Tax

[Tetley]

Hope Danny's specialising in IHT then !!!

he might bryns if he is still here....    

[byrney]

Hope Danny's specialising in IHT then !!!

[Tetley]

Thanks Tandas and Tetley for your replies.

Tetley,  I did follow the link to the CAB site and it highlighted a concern I had regarding my daughter being a non resident, would she be entitled to the residents allowance? This article seems to have answered my concern, even after Brexit.

The Spanish Supreme Court has ruled over a case, where a Canadian beneficiary of a Spanish resident wasn´t allowed the inheritance tax allowances of the region where the deceased resided.

Going back to the end of 2014, when the EU Court of Justice ruled that the discrimination between EU residents and non-residents with regards to Spanish inheritance tax was illegal, Spain was obliged to change its inheritance law and it did, with the new law coming into effect on January 1st 2015. We reported about it then, and encouraged those who had been affected by the discriminatory taxation before that date, to start proceedings to get the excess payments refunded.

What Spain neglected to include in the new tax regulation was that beneficiaries living outside the EU, with a connection to one of the the Autonomous Regions, either through the location of inherited assets or because the deceased resided there,  should be treated without discrimination as well and should be allowed to benefit of the tax allowances of that Autonomous Region.

The Supreme Court has now ruled in favour of the beneficiary, living in Canada (see intro, ruling 19.2.2018) and obliged the State to amend the tax regulation with regards to inheritances and donations, again, to include those living outside the EU as well.

The State has also been sentenced to return the difference between the inheritance tax paid and the tax that was due taking into account the regional allowances. This opens the way for those in similar situations, going back 4 years, to start proceedings to get the excess inheritance tax refunded.
So Tetley, Thanks again.

just out of intrest with your above findings ,how do you see the best way forward for your own situation as you have outlined in your OP  as im sure there will be other folks in a similar situation of planning for the familys IHT ?



for the intrested this is the Belvin Franks info below  ( 28 3 18 )


A Spanish Supreme Court ruling could be good news for UK nationals with concerns about how Brexit could affect Spanish succession tax.

Spanish succession and gift tax is an unpopular tax, so much so that thousands of people renounce their inheritance each year, largely because of the prohibitive tax bills. However, over recent years reforms made by many regional governments have significantly reduced this tax liability for spouses, descendants and ascendants.

Now, a Spanish Supreme Court Ruling is reassuring for non-EU/EEA residents. There is a strong chance these regional rules will continue to apply to UK residents after Brexit, even if the UK ends up outside the European Economic Area (EEA).

If you live or have assets in Spain, your succession tax liability depends on whether you (when you receive an inheritance or gift) and your beneficiaries (when they receive assets from you) are eligible for the more beneficial regional rules. If not, tax is calculated under the state rules, where the highest reduction is just €15,956. In contrast, some regions offer a 99% succession tax relief and even substantial exemptions for spouses and descendants.

Background

In the past, you had to be habitually resident in an Autonomous Community to benefit from its regional rules.

Then in October 2011 the European Commission referred Spain to the European Court of Justice (ECJ) for discriminatory rules on succession and gift tax that required non-residents to pay higher taxes than residents. This went against the EU's fundamental principle of free movement of people and capital. In September 2014 the ECJ ruled that Spain was acting illegally by allowing this different tax treatment.

In January 2015 new rules come into force so that beneficiaries living outside a Spanish Autonomous Community can now benefit from the local rates and allowances... but only where they live in the EU or EEA. This is despite the fact that the EU Treaty's free movement principle also includes third parties, and not only EU/EEA countries.

Recently, the Spanish Supreme Court published a landmark judgement concluding that the terms of the ECJ 2014 ruling must be extended to all non-resident beneficiaries, regardless of whether they live in the EU/EEA or not.

2018 Spanish Supreme judgement

On 19th February 2018, the Supreme Court reached a judgement in the case of a Canadian resident beneficiary who inherited an estate from her mother who lived in Cataluña. She had paid over €300,000 in succession tax as per the state rules.

The court ruled that Spain's succession and gift tax rules breach the EU Treaty's free movement of capital rules, and that the 2014 ruling should also apply to non-EU/EEA residents. It believes the breach is so clear and serious it also justified the civil liability of Spain. In other words, it recognises the rights of taxpayers to seek damages.

How does this change the rules?

The Spanish succession and gift tax rules themselves have not changed; the ruling is not currently binding for Spanish tax administration so at present the regional beneficial rules still do not apply to non-EU/EEA residents. However –

1)    The judgement gives non-EU/EEA residents a strong argument as to why they should be able to apply regional tax rules and rates when receiving inheritances and gifts.

2)    It is possible that Spain will change its legislation in future to extend regional benefits to non-EU/EEA residents.

3)    It opens the door for non-EEA resident taxpayers to claim back refunds for succession and gift tax paid under the discriminate rules over the last four years (the statute of limitations period).

A relief for UK nationals with Brexit on the way

This good news is particularly relevant for UK nationals. As things stand at the moment, if the UK ends up outside both the EU and EEA after Brexit, then anyone living in Spain and receiving an inheritance from the UK, or any UK resident receiving an inheritance or gift from Spain, would not be able to apply the beneficial regional rules. This could result in significantly larger tax bills.

So if Spain changes its legislation to cover non-EU/EEA residents, then the local rules will apply to them too, regardless of the final Brexit terms. Even if the rules do not change, they may still be able to use the Supreme Court judgement to claim the application of the regional rules, in certain cases.


looks like an IHT  lawyers dream....

[longsands]

Thanks Tandas and Tetley for your replies.

Tetley,  I did follow the link to the CAB site and it highlighted a concern I had regarding my daughter being a non resident, would she be entitled to the residents allowance? This article seems to have answered my concern, even after Brexit.

The Spanish Supreme Court has ruled over a case, where a Canadian beneficiary of a Spanish resident wasn´t allowed the inheritance tax allowances of the region where the deceased resided.

Going back to the end of 2014, when the EU Court of Justice ruled that the discrimination between EU residents and non-residents with regards to Spanish inheritance tax was illegal, Spain was obliged to change its inheritance law and it did, with the new law coming into effect on January 1st 2015. We reported about it then, and encouraged those who had been affected by the discriminatory taxation before that date, to start proceedings to get the excess payments refunded.

What Spain neglected to include in the new tax regulation was that beneficiaries living outside the EU, with a connection to one of the the Autonomous Regions, either through the location of inherited assets or because the deceased resided there,  should be treated without discrimination as well and should be allowed to benefit of the tax allowances of that Autonomous Region.

The Supreme Court has now ruled in favour of the beneficiary, living in Canada (see intro, ruling 19.2.2018) and obliged the State to amend the tax regulation with regards to inheritances and donations, again, to include those living outside the EU as well.

The State has also been sentenced to return the difference between the inheritance tax paid and the tax that was due taking into account the regional allowances. This opens the way for those in similar situations, going back 4 years, to start proceedings to get the excess inheritance tax refunded.
So Tetley, Thanks again.

[Tetley]

Our wills have been amended to include 'UK law to apply', so our daughter would inherit all our assets.  
Our assets would be our property, so lets say for example is worth 175000.00€.
What would the tax be and what would happen if our daughter could not pay the tax within the six months?
Would appreciate any replies.  

https://www.citizensadvice.org.es/tax-implications-brexit/

suggest look at gifting your daughter your home pre brexit as i think the gift tax would be abought 8/9 % on the castrol value,but you need propper advice.

"This is particularly significant if as a resident of Spain you are expecting to inherit a large sum from the UK. If you live in Andalucía for example, with effect from Monday 1st January 2018, you can inherit upto €1,000,000 from a parent with no inheritance tax to pay in Spain, but following Brexit, then you would only receive the allowance of €16,000 if there is no agreement otherwise."

[tandas]

Inheritance tax in Andalusia is €250k or more in UK ithink it's £350k so depending on what other assets you had made no tax due.  But  someone else might know better.

[longsands]

Our wills have been amended to include 'UK law to apply', so our daughter would inherit all our assets. 
Our assets would be our property, so lets say for example is worth 175000.00€.
What would the tax be and what would happen if our daughter could not pay the tax within the six months?
Would appreciate any replies.