Inheritance and Donation Tax for Non Residents

The Law 26/2014, dated 27th November, altering the Law 35/2006, dated 28th November, of Personal Income Tax and that of Non Residents, states an important modification in the Inheritance and Donation Tax (ISD) applicable to the non residents who have their residency in a member state of the European Union (EU) or the European Economic Area (EEA). This arises from the Sentence of the EU Justice Court on the 3^rd September 2014, which stated that Spain violated the articles 63 of the Treaty of Operation of the EU, concerning the freedom of movement of capital and article 40 of the Agreement of the EEA, in extension of same, whereby the law should be modified in order to comply with the judgement of the mentioned legal Ruling.

INHERITANCE

Causante no residente:

If the deceased had been resident out of Spain, in a member state of the EU or the EEA, the heirs would have the right of application of the regulation of Inheritance Tax in the Autonomous Region where is to be found the major value of the assets and Rights located in Spanish territory. If there are no assets or rights located in Spain, each one of the heirs resident in Spain will apply the regulation in force of the Autonomous Region where the heir resides.

Examples:

1. Deceased not Resident in Spain, resident in a member state of the EU or the EEA, heirs not resident in Spain, also resident in member state of the EU or EEA, or heirs Resident in Spain; will be applied the tax of the Autonomous Region where are located the major value of the assets or rights.
2. Deceased not Resident in Spain, resident in a member state of the EU or the EEA without assets and rights in Spain, heirs resident in Spain; will be applied the tax of the Autonomous Region where each heir resides.

 Deceased resident and heirs non resident:

 If the deceased had been resident in Spain, and in this case the heirs are the Non Residents, these being resident in a member state of the EU or the EEA, they will have the right of the application of the regulation of Inheritance Tax of the Autonomous Region where the deceased was resident.

Example:

1. If the deceased in Resident in Baleares, the Inheritance Tax will be calculated with the tax in force in this region for those heirs that comply with the requirements, if any of them does not comply with the requirement of being resident in a member state of the EU or the EEA they will have applied the state taxes.

DONATIONS

Donation of property located in Spain:

Being non resident in Spain the donees, but resident in a member state of the EU or the EEA, they will have the right of the application of the regulation in force of the Autonomous Region where are located the assets donated.

Example: A Resident in Spain donates an abode located in Baleares to his/her children who are not resident in Spain, but are resident in Germany, the Donation Tax payable in order to receive the mentioned donation will be that of the regulation in force in the Baleares.

Donation of properties located out of Spain:

If tghe donees are Resident in Spain, they will have the right of the application of the regulation in force of the Autonomous Region where each of the donees resides.

Example: A Non Resident in Spain donates certain abodes located in Baleares to his/her children resident in Baleares, the donees will have the right to pay the Donation Tax applying the regulation in force in Baleares.

Donation of properties located in Spain:

If the donees are non resident in Spain, but are resident in a member state of the EU or the EEA, they will have the right of the application of the regulation in force of the Autonomous Region where the assets have been located the most days in the 5 years prior to the donation.