On 3 September 2014 the European Court of Justice (ECJ) ruled that the Spanish Inheritance and Gift Tax (IHT) regulations discriminate against non-residents in Spain and that they break articles 63 of the Treaty on the Functioning of the European Union (TFEU) and 40 of the European Economic Area (EEA). This is an important legal change for non-Spanish residents in Spain who own property or other assets here.

The ECJ stated that the Spanish laws act against the free movement of capital within the EU and EEA. Members of the latter are 27 of the 28 EU member states plus Austria, Finland and Sweden. Switzerland is not a member, however, the ECJ has previously ruled against discriminatory treatment of Swiss residents in Germany.

The basis of this ruling is that Spanish residents pay inheritance tax through regional authorities, but non-Spanish residents were subject to State regulations on payments, which are higher than those levied by the regional authorities. Hence, the ECJ claimed that Spain had not met its EU obligations by treating residents and non-residents differently.

Spain can’t appeal this against this ECJ ruling and the inheritance laws for overseas residents will have to change shortly. It is important for our non-Spanish clients to note that this change in the law doesn’t mean that they can automatically reclaim overpaid inheritance taxes through the courts, although it does allow people to make a case for reclaiming taxes.

The statute of limitation period in Spain is four years and the period within which inheritance or gift tax has to be paid is six months from the date of receiving the inheritance. This means that anyone who has paid IHT in Spain in the last four to five years can now take action to reclaim the tax.

Perez Legal Group can advise you on how this change in the law affects any IHT matters you are currently settling. We are also able to help you make a case to reclaim excess inheritance tax, if you paid within the last four to five years, thus helping our clients take advantage of this important new ruling.