Don’t be left without your tax refund! The Spanish Tax Office is refunding the overpaid inheritance and gift tax.

After several years warning Spain that its rules of inheritance and gift tax violated the free movement of capital within the EU, finally the Court of Justice of the EU, on September 3rd 2014, approved the Court Decision (Case C -127 / 12) which ended with such discrimination.
On January 1st 2015, the Final Provision Three of the Law 26/2014 entered into force, whereby the second additional provision of the Law 29/1987 (Spanish inheritance and gift tax Law), changes. By means of this amendment, the following special regime has been approved:

1. A non-resident in Spain but resident in the European Union, can apply the tax regulations of the Autonomous Communities.
   2. Residents who inherit assets in other countries of the European Union can also apply the tax regulations of the autonomous communities in which they are residents, regarding the inherited assets.

Basically, in relation to EU citizens, the rule is that when the deceased was not resident in Spain and the heirs are also non-resident in Spain, the regulation of the Autonomous Community in which the highest value of the assets that the deceased had in Spain are located, are applied. So if a British citizen, had a house for example in Mallorca € 1,000,000 and a € 200,000 apartment in Barcelona, ​​the heirs still being not resident in Spain, but in the UK, are able to apply the tax rules of the Balearics which are much more beneficial than the state rules.
Should the heirs be resident in Spain, the rules of the Autonomous Community where they reside applies.
If the deceased has been resident in the Balearics and the heirs are not resident in Spain, but in the UK, for example, for the assets in Spain, the non-resident heirs are to pay their inheritance tax according to the rules of the Autonomous Community where the deceased resided.
Although the legislation doesn’t mention the retroactive nature of the mentioned Law, the Tax Office is refunding to those who are applying for the difference of the tax paid at the time, and the amount that should have been paid if this regulation had been approved before.
In some cases we may be talking about a lot of money, since in the Balearics, in transactions between relatives of first degree, the inheritance tax is 1% and the gift tax 7%, compared to the state’s progressive rate going up to 34%.
The deadline to request a tax refund, is the normal prescription period, ie four years. So if you accepted an inheritance or received a gift in the last 4 years and implemented the State regulations, please contact us to study your case in order to process your tax return: nicole@mollmertens.com