Spanish non-residents who inherited or acquired by gift, assets or property in Spain and paid Spanish Inheritance and Gift Tax (“IGT”) may be entitled to claim a tax refund.
Judgment of the European Court of Justice of September 3, 2014, (ECJ case C-127/12, Commission vs. Spain) declares that Spanish IGT Law is against the principle of free movement of capital within the EU, as provided under Article 63 of the Treaty on the Functioning of the European Union (“TFEU”) and Article 40 of the Agreement on the European Economic Area (“EEA”).
Spanish IGT is regulated at both State level and at regional level by what is called the Autonomous Communities (“AtC”). As a general rule, State legislation applies to non-residents. The AtC’s rules apply only to Spanish residents if there is a personal or real connection with an AtC. Where such a connection exists, Spanish residents are granted tax benefits that, in practice, allow them to pay much lower taxes than non-residents. The most relevant tax benefit is a 99% IGT reduction available in most AtCs that has led to discriminatory taxation for non-residents. For example, a non-resident may have paid 100€ when a Spanish tax resident, in the same circumstances, may have only paid 1€.
The ECJ Judgment will bring modifications to the Spanish IGT Law and to the laws that rule the Spanish Financing System to eliminate this inequality.
The Judgment´s major importance now is that non-resident tax payers may claim an IGT refund.
Please contact the attorneys listed Marisa Fernández and Alfonso López Muñoz to learn more about this potential refund opportunity.