Spain – ECJ Referral on Discriminatory Inheritance and Gift Tax Rules

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On 27 October 2011, the European Commission decided to refer Spain to the ECJ for discriminatory rules on inheritance and gift tax that require non-residents to pay higher taxes than residents. The Commission had already formally requested Spain on 5 May 2010 (IP/10/513) and additionally on 17 February 2011 to take action to ensure compliance with the EU rules with regard to inheritance and gift tax provisions. However, no amendments have been made to the Spanish legislation on the matter.

Inheritance and gift tax in Spain are regulated at both state level and at the level of autonomous communities. The autonomous communities’ legislation grants residents a number of tax benefits that, in practice, allow them to pay much lower taxes than non- residents.

The Commission considers this discriminatory tax treatment to constitute an obstacle to the free movement of people and capital, fundamental principles of the EU’s Single Market, and is in breach of Articles 45 and 63 TFEU respectively.

Regarding the arguments brought forward by the Commission, it can reasonably be expected that the ECJ will decide that the rules at issue are indeed in breach of EU law. However, such a decision by the ECJ would not directly improve the tax situation of EU tax residents who paid inheritance taxes at a higher rate than Spanish tax residents. Should EU tax residents want to challenge the excess inheritance tax paid in Spain, they would have to personally claim for a refund of such excess before the competent Spanish Tax Office now. If not, these protective claims could be time barred at the moment the ECJ judgment is made available.

If the outcome of a personal refund claim process is successful, the claimant will be entitled to obtain the refund of the unlawful tax plus late payment interest.


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