Spain condemned to end the tax discrimination in the inheritance of non-residents

On November 16, 2011 we published an article on this blog about the accusation presented by the European Commission to the European Court against the Kingdom of Spain of discrimination against non-resident at the time of inheritance. After a long process, the judges in Luxembourg finally gave the reason to the Commission.

On September 3, 2014 the Court of the European Union ruled in the case C127/12, concerning an appeal of the European Commission against the Kingdom of Spain for not complying with the founding treaties of the European Union. In its statement, the Commission requested the Court to declare the breach of obligations of the Kingdom of Spain as European partner because of the introduction of differences in the tax on inheritance and in the gift tax, depending on the place of residence of the participants, that is, whether or not they are resident in Spain. In practice, upon the acceptance of the inheritance or donation in Spain, non-residents generally pay much higher taxes than residents.

This requirement of the European Commission was the end result of a process initiated in 2007, in which the European government had already asked Spain to change its laws concerning the taxation of the gift or inheritance. A little change was made, but it did not satisfy the Commission of the European Union, who filed a lawsuit in the Court of the European Union against Spain. The state attempted to defend itself, but the court concluded that the state law in the application of inheritance and gift tax discriminates against non-residents, and this discrimination is an affront to the freedom of movement of capital, one of the fundamental freedoms, which should save the Union.

Carlos Prieto Cid – Lawyer

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