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As reported in this Blog on the day it was issued, a Judgement rendered by the ECJ (EU’s Supreme Court) on September 3rd, 2014, stated that the Kingdom of Spain had in establishing differences between the fiscal treatment of inheritances and gifts in Spain for residents and non-residents failed to comply with the obligations laid down by the European Regulations, as a discrimination against those who are “non-resident” in Spain was thereby established given that their treatment for taxation purposes was almost generally worse than that given to residents, which contravenes the principle of free movement of capital.

This Judgement entails an obligation for the Kingdom of Spain to amend, in the (immediate) future, its Inheritance and Gift Tax laws as regards the treatment thereby given to non-residents in Spain where the latter are citizens of countries in the EU or the European Economic Area. This also means that the Spanish State’s Laws and the Spanish Regional Legislations also have to be amended insofar as the application thereof involves a differential treatment between residents in Spain depending on the Spanish region in which they reside.


There is, however, a more immediate effect arising from the above in relation to those instances of discrimination which have taken place up until the present date, i.e. in respect of the taxes paid by non-residents to date under a legislation which, so to speak, is contrary to the “constitutional” rules of the EU.

In relation to the above, the Notary Public and member of the Spanish Association of Tax Advisors Javier Máximo Juárez points out in an article published on “www.notariosyregistradores.com” that the Judgement of the ECJ does not only take effect for future cases but it also has full retroactive effect; that is, the Judgement is not valid from now on but from any past time onwards, and it is binding on the courts and Public Administration of the State against which it has been issued.


Indeed, most news or opinion articles published so far concur in that the possibility exists of requesting a refund of the amounts paid as a result of the differential treatment between the tax paid by a non-resident and the tax they would have had to pay had they been resident in Spain, always limited to the four years (*) determined by the Statute of Limitations applicable to such a possibility.

But what portion of the amount paid as Inheritance or Gift Tax exceeds the right amount and can therefore be the subject of a refund application?

There was a similar case in the past where the “rate” of the Tax on the Capital Gain obtained from the sale of a real property had been established at 35% for non-residents and 15% for residents. The answer in this case was clear and the refund application referred to the 20% paid in excess (plus interest) as a result of the differential treatment.

Map ot the 17th Autonomous Regions of Spain

Map ot the 17th Autonomous Regions of Spain

In the present case, however, there is no such specific and easy basis for comparison because the discrimination arises from the application of the different legislations of the 17 Autonomous Regions of Spain which, alone, determine (also among those who are resident in Spain) enormous differences with regard to the application of these taxes.

The question, therefore, is whether the difference between the tax paid by a non-resident and the tax paid by a resident in one of the 17 Spanish territories, each with its own rules, can be ascertained.


There is no clear answer to this, although some legal and fiscal experts have noted that the refund should relate to the difference between the amount paid by a non-resident and the amount they would have paid as a resident in the specific Autonomous Region with which they have closer ties, or where their home is located, or where most of their interests are located, etc. But this is certainly not based on any specific rule currently in force.

Some of the aforementioned experts have pointed out that the criteria could be the Bill for the Amendment of the Act which has been proposed to Parliament by the party in Government and which, with or without amendments, will in all certainty come into force on January 1st, 2015.

Such a calculation, however, cannot be made on the basis of a mere proposal, nor can those affected wait until January 1st of next year to apply for a refund, particularly in those cases where the application will by then be barred by the four-year Statute of Limitations.


Going back to the enlightening article of the Notary Javier Máximo Juárez, in which he advocates (as per Judgement 145/2012 of the Constitutional Court of Spain, issued on July 2nd) the “non-validity of the Spanish regulation –contrary to the ECJ- from inception”, below is a transcription of the literal wording of said article:  

  • The connecting points affected by the Judgement (of the EU Court) are and always have been fully null and void and inapplicable even if they have not been formally repealed.

  • Non-residents, and even residents where they are affected, who have paid their taxes in accordance with such points, whatever the date on which they filed their tax return or made the payment […] under which the process was initiated, are entitled to a refund of the amount paid, with the applicable interest for late payment thereon, even if the four years of the Statute of Limitations have passed and without having to resort to the Administration’s Financial Liability proceeding.

He also points out that:

  • Non-residents and residents whose tax returns are thereby rendered null and void may not pay their taxes on the basis of replacement rules to be enacted in future unless such replacement rules are expressly given retroactive effect, which would be highly questionable from the point of view of both domestic Law and EU Law.


The aforementioned author has also published on the same website an addendum to his report in which he clarifies some important points such as the amount which, in his view, can be claimed, the process to be followed, the statute of limitations period, etc.

The amount to be claimed would not be the difference between the amount paid at the time by the non-resident less the amount they should have paid in the relevant Autonomous Region, particularly as there are no regulations on the matter.

He therefore considers that the amount which should be the subject of the refund claim is “the total sum paid at the time” plus legal interest thereon (although this –the interest- is more questionable).


As regards taxable events which have already taken place (decease or gift) or which take place before the enactment of the new set of replacement regulations, which is expected to take effect in early January of 2015, it is advisable to file a tax return with the National Tax Management Office without indicating any sum to be paid or indicating “0”.


  • The Judgement of the EU’s Supreme Court refers to the Spanish Gift and Inheritance Tax.

  • It only affects citizens of the EU and the European Economic Area who are not resident in Spain.

  • While no mention is made in the Judgement of the differential “internal” taxation of those who are resident in Spain, it could be the basis on which Spanish Courts may also render null and void, or contrary to Spanish Law, the regulations of the Autonomous Regions on the grounds of discrimination between residents in Spain.

  • The minimum amount of the refund can be the difference between the amount paid by a non-resident and the amount a resident in the same situation would have paid, plus interest.

  • The maximum amount to be claimed could be the total sum paid by the non-resident in connection with the inheritance or the gift. There is the possibility, albeit more questionable, of also asking for interest on that sum.

  • In the specific case of inter vivos gifts, it must be noted that two different taxes have to be paid:

         1.- Gift Tax on the gratuitous acquisition of the assets given to the donee, the amount of which Tax can be the subject of a refund application by a non-resident.

         2.- Tax on the Capital Gain to be paid by the donor in respect of the “deemed” (therefore not actual) profit obtained by the donor as a result of such a transfer of property. This Tax is the same for residents and non-residents (in fact could be discrimonatory for the residents), the EU’s Supreme Court Judgement does not refer to it and a refund thereof may not be claimed. In fact, where the donee has paid the Gift Tax and the donor has failed to pay the Tax on the “deemed” income from the transfer, the Public Treasury will claim the amount thereof plus interest and penalties, always with a four-year statute of limitations from the end of the voluntary compliance period of this Tax if said period has not been discontinued.

  • *Refund claims relating to the amounts paid as Inheritance and Gift Tax may not be limited to the last four years by virtue of the Statute of Limitations but may also extend to the financial years preceding the last four years

 Obviously, as on previous occasions, it must be stressed that this is an opinion article (and therefore subject to contradiction) and that every specific case must be studied beyond the myths and inaccuracies which for years have existed in relation to inheritances in Spain and the taxation thereof, which we analysed in our post of https://lizarzalegalblog.com/2013/03/25/inheritance-false-myths-and-platitudes/

 Lizarza Abogados



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