The European Court of Justice (“ECJ”) has ruled that tax payers of other EU member states can apply for the refund of Inheritance Tax in Spain if they were not allowed to apply the same reliefs that Spanish residents. In a very recent judgment (case C-127/12) , the European Court of Justice (“ECJ”) has ruled that Spain has breach the European Treaty (article 63) by discriminating tax payers of other EU member states.
According to Spanish Law, inheritance by close relatives of the deceased (namely, spouse and children) is not taxable in most regions or only taxed lightly due to numerous exemptions, allowances and reliefs. However, if the deceased or / and the heirs are nonresidents, all these tax reliefs are not applicable, resulting in the inheritance being fully taxed with respect of the assets of the deceased located in Spain.
Since it is estimated that approximately 1.5 Million Europeans own a property in Spain, the impact of this discrimination is not to be understated. The judgment of the ECJ opens the floodgates for thousands of claims to the Spanish Tax Office for the undue tax paid.
Read more: the Inheritance Tax in Spain
However, it would be naïve to assume that the path to get the refund will be easy. First of all, if the tax was paid beyond the normal statute of limitations period (four years), the Spanish Tax Office and the Spanish Courts are very reluctant to award the refund.
So only people that paid the Spanish Inheritance Tax during the last four years may have chance to get the refund. And they have to be careful about the procedure to be followed because the Tax Office is likely to put as many hurdles as possible to impede or, at least, delay the refund.
At Tax Partners we are proud to offer a deep expertise in this kind of procedures, since we were, by large, the leading professional firm that dealt with the refund of the Spanish Capital Gains Tax unduly charged to European Tax payer, which was also declared contrary to the European Treaty in 2007. In that case, we successfully helped more than 500 Europeans to get the refund of that tax .