How a reform in Inheritance Law could save you money

There has been a substantial amount of confusion surrounding Spanish inheritance and Gift Tax IHT (Impuesto Sucesiones y Donaciones: ISD.) The fluctuation in rates dependant on the particular autonomous community and the tax resident status of a deceased’s heirs, has made finding a concrete answer or general rule increasingly difficult.

However, there might just be light at the end of the tunnel. It is understood that the present regulations stipulated by Spanish law have been deemed incompatible with Articles 45 and 63 of the Treaty on the Functioning of the European Union which demand the free movement of persons and capital, and thus The European Commission (EC) has submitted a formal request that Spain amend its IHT regulations in order to comply with the afore mentioned articles.

When Inheritance or Gift Tax is dealt with under National Law it has been recognized as being substantially higher than that dealt with under the laws of an autonomous community. The application of National law over that of an autonomous community has been based on the duration the beneficiary or deceased has resided in said community. This in turn has discriminated against non-tax residents and tax residents who recently relocated from on community to another. This discrepancy between the taxation of an autonomous community and that of the State law has left the EC calling for a more cohesive system that would not impose a higher tax burden on non-residents (irrespective of their nationality) and assets held abroad.

It is believed that if Spain does not further its amendments to its inheritance taxation laws following the ‘complementary reasoned opinion’ sent by the Commission it may be referred to the Court of Justice of the European Union.

If the changes in Capital Gains Tax, that too were rather insisted by the EU are anything to go by then it would appear that the law determining inheritance will be renovated shortly. With a cloud of uncertainty now surrounding the validity of the law it has been suggested that the possibility of challenging and appealing an IHT bill is now an option.

However, it should be noted that the appointment of lawyers with comprehensive local and national legal experience would be highly advisable. Firms with a nationwide infrastructure and highly qualified innovative professionals such as Lexland Abogados are in an ideal position to deal with these sorts of matters.

Written By Legal Advisor Nick Andreasen