Spanish Succession TaxPosted by Anne Fri, June 02, 2017 20:52:25
It is well over 2
years now, since the European Court of Justice's Ruling, that the Spanish Tax
Authority’s succession tax system conflicted with the European Union principles
of freedom of movement of EU individuals and circulation of money within the
That case was
specifically in relation to the distinction the Spanish Tax Authority
previously made between those who were resident in Spain; and those who were
The Ruling was that
Non-Spanish Residents (who were also Europeans) should be treated in the same
way as Spanish residents, for the purposes of Spanish Succession Tax.
Following the Ruling,
Spain revised its practice, as required; and now (for example), British owners
of Spanish properties are treated in the same way for Spanish Succession Tax
purposes, irrespective of whether or not they are resident in Spain.
But although the
Spanish Tax Authority is now compliant in terms of the Spanish residency/ non-
Spanish residency distinction, there remains a separate glaring inconsistency
in approach, which also amounts to discriminatory treatment of EU individuals.
That is the different
levels of Spanish Succession Tax impact, according to which Autonomous
Community within Spain is the charging Tax Authority in the case in question.
In many countries,
the calculation and charging of succession taxation is simplicity itself.
However in Spain, it is a highly complex system, which creates a great deal of
uncertainty, inconsistency and controversy.
Tax is not always administered centrally; nor is it charged in a uniform way
nationally; nor is it charged at a single rate; nor is it subject to universal
national allowances and reductions.
At the heart of the
complexity is the fact that for Spanish nationals/ Spanish residents, the
responsibility for Succession Tax administration lies with the 17 individual
autonomous communities within Spain. Each autonomous community has discretion
as to charging basis; practice; and allowances/ exemptions.
This fiscal quagmire creates
bewildering inconsistencies across Spain. On the attached image, the Spanish
Succession Tax impact is indicated, based on the same Estate details, but
varying according to which is the applicable Autonomous Community.
And, as a very
noteworthy side issue, it is not only foreign owners of Spanish properties who
are exposed to the unfairness of this perplexing system; but it has been
acknowledged that many Spanish families living in Spain themselves suffer this
arbitrary discrimination under the current system, according to where (in
Spain) their family members live.
It remains to be seen
whether this very worrying anomaly will be regularised by centralizing/
standardising administration of Spanish Succession Tax; or (if that is deemed
too radical), at least a harmonisation of practice across Spain.
For non- Spanish
owners of Spanish properties, they are fortunate, in that there are
opportunities in Spanish Wills and estate planning, to mitigate this exposure
to Spanish taxation; and expert advice is recommended to ensure that the fiscal
impact is minimised; in planning for future inheritance.
commentary is not intended to be exhaustive; and case-specific legal advice
should always be sought.
The Legal 4 Spain
team provides a full Wills, Estate Planning and Probate service for properties
and other assets anywhere in Spain. We are always happy to provide a
competitive cost estimate in the first instance, on a no-obligation basis.
Spanish Succession TaxPosted by Anne Tue, May 09, 2017 22:26:45
It is well over 2 years now, since the European Court
of Justice's Ruling that the Spanish Tax Authority’s succession tax system conflicted
with the European Union principles of freedom of movement of EU individuals and
circulation of money within the EU.
That case was specifically in relation to the
distinction the Spanish Tax Authority previously made between Spanish Residents
and Non-Spanish Residents.
The Ruling was that (European) Non-Spanish Residents
should be treated in the same way as Spanish residents, for the purposes of
Spanish Succession Tax.
Following the Ruling, Spain (as required) revised its
practice; and now, British owners (for example), of Spanish properties, are
treated in the same way for Spanish Succession Tax purposes, irrespective of
whether they are resident in Spain or not.
It is considered probable by most commentators, that
the Spanish Succession Tax treatment of British owners of Spanish properties is
likely to change again in the light of the Brexit Referendum decision.
In principle, (as regards British owners of Spanish
properties who are not actually resident in Spain), the Spanish Tax Authority
will no longer be obliged to comply with the EU principles which require equal
treatment of EU citizens.
It remains to be seen exactly how the negotiation
between the UK and Spain will be concluded as regards fiscal issues. But, it is
considered probable that once the UK is outside the EU, (non-Spanish Resident)
British owners of Spanish properties will lose this special EU benefit, and
will again be subject to the much more onerous 'national' Spanish Succession
Tax rules, as applied by the Central Spanish Tax Office.
This would strip from British (but non-Spanish
Resident) owners of Spanish properties, the more ‘generous’ succession tax allowances/
exemptions which the autonomous communities within Spain otherwise currently offer.
So, a meagre succession tax-free inheritance amount of just below 16,000 Euros
per spouse/ descendent beneficiary is then allowed. Any inheritance received
above that value is taxable.
Well advised British owners of Spanish properties
(but who are not actually resident in Spain) should therefore review their
Spanish Wills and Estate Planning arrangements, to be prepared for this anticipated
consequence of Brexit.
The tax mitigation steps which are recommended to
prepare for this anticipated consequence of Brexit, are in fact, intelligent
estate planning steps to take, even if the outcome of Brexit in this context is
less onerous than expected.
So, in other words, a Spanish Wills and Spanish Estate
Planning review is recommended as a wise process to go through in the run-up to
Brexit- whatever the outcome of negotiations between the UK/ the EU. It is quite possible that the Spanish tax
exposure can be reduced- whatever the end result of Brexit.
This general commentary is not intended to be
exhaustive; and case-specific legal advice should always be sought.
The Legal 4 Spain team provides a full Wills, Estate
Planning and Probate service for properties and other assets anywhere in Spain.
We are always happy to provide a competitive cost estimate in the first
instance, on a no-obligation basis.
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:41:44
April 18th, 2016
A frequently asked
question by new clients prior to making Wills of their assets in Spain, is: ‘How
much Succession Tax is payable in Spain?’
A simple enough
question; and in the case of UK estates, for example- in the majority of cases-
there is a simple enough answer. By contrast in Spain,
there are a significant number of potential variables in the
calculation, such that
the position is generally very much case- specific. It can therefore be
misleading to provide generic advice/ calculations. (But an experienced
practitioner will be able quickly to assess- based on the relevant details- and provide
an indicative amount or percentage).
In this article, I
will briefly review the usual variable factors, to identify the details which are usually
required from clients. Then I will examine in more detail, a specific recent legal
development as regards the actual location of real estate interests within
Variable Factors in
Spanish Succession Tax (SST) Assessment
The principal factors
which will determine the amount of SST which will be payable in a given
case include: categories of assets; open market value of assets; actualised
rateable value of real estate assets; official value of other assets (eg. vehicles);
residential status of deceased; residential status of beneficiaries; number
of beneficiaries; relationship/ connection between the deceased and each
beneficiary; total deceased estate value; and pre-existing owned asset value by
each beneficiary in Spain. The other determining factor for SST calculations
which requires particular explanation, given that there have been recent legal
changes, is the location within Spain of the real estate assets in a deceased estate.
Effect of Real Estate
Location on SST Assessment
Traditionally (for SST
calculation purposes), a distinction was made between Spanish property
owners who were actually fiscally resident in Spain; and Spanish property
owners who were fiscally resident outside Spain (for example, UK families with a
holiday home in Spain, for occasional use). Spanish residents had
the benefit of the SST exemptions/ allowances of the Autonomous Community
(there are 17 in Spain) within which the property was situated for the
purposes of calculating SST.
non-Spanish residents were allowed no such regional reductions in SST, and were subject
to the basic ‘national’ rules. So, even for spouses and descendants, each
beneficiary had an SST- free allowance of just 15,957 Euros; and everything beyond
that value level was subject to SST in the hands of each individual
A challenge was made
against this practice through the EU Courts, on the basis that it created
discrimination between European citizens, dependent upon whether they were
fiscally resident in Spain or not. This was held to be contrary to the principles of
freedom of movement of European citizens/ their capital within Europe.
As such, Spain having
duly complied with the EU Ruling, no longer differentiates in SST calculations
for European nationals with properties in Spain, between those who are fiscally
resident in Spain and those who are not.
So, for UK nationals
with properties in Spain, (for as long as the UK remains an EU member), the actual
location in Spain of the property in question is of fundamental importance
in determining the SST liability. The actual impact of SST varies
dramatically between the individual Autonomous Communities within Spain, according to
the applicable Autonomous Community’s own allowances and deductions for SST
calculations. (As a side issue, many
commentators believe that the imposition by different Autonomous Communities
of different SST rules also creates discrimination between EU citizens
depending on where in Spain their property is situated. No Ruling or Directive
has yet been issued against Spain on this front. However, some see it as almost
inevitable that eventually Spain will be forced to centralise/
standardise the SST policy across all the Autonomous Communities, to bring an end to
this anomalous situation).
But pending any
further change, it is important to note the actual location of a Spanish property
continues to have a significant impact on SST liability.
Another issue for UK
estate planners to bear in mind in advising clients with Spanish assets, is the
availability of Unilateral Relief Treaty credit for the purposes of UK IHT
calculation, based on SST actually paid. This enables a final net overall UK
IHT/ SST calculation to be made. There are a significant number of rules/
restrictions to bear in mind in this regard- also that the current Treaties are based on
the UK’s current status within the EU. Should that change, then it is
assumed that the position would need to be revisited; and this could, of course, have
an important impact on overall tax rates in the context of inheritance of Spanish
assets owned by UK nationals.
The Legal 4 Spain team
is always available to provide preliminary advice on a no- obligation basis,
in relation to Wills of Spanish assets and Spanish estate planning generally.
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:29:12
November 2nd, 2014
As covered previously, the European
Court of Justice has ruled that Spain’s practice of charging non-Spanish
resident beneficiaries Spanish Succession Tax (SST) at a different rate from
Spanish residents is discriminatory; and therefore unlawful.
Entitlement to demand a repayment of
previously paid SST
Thus far, there are no exhaustive
guidelines. But in principle, where a non- Spanish resident has accepted an
inheritance of Spanish assets and has paid SST during the last 4 years at a
rate which is higher than they would have paid had they been Spanish resident,
then they are entitled to demand a repayment of the difference between the
non-resident rate and the resident rate.
For these past ‘discriminatory’
cases, it remains to be seen whether a specific, official process will be
established in Spain, to enable repayments of previously paid SST to be
In the absence of a clear
administrative process in Spain for demanding a repayment in these
circumstances, an individual legal action needs to be mounted by each
beneficiary who considers that they have overpaid SST and are therefore
entitled to demand a repayment.
And the legal right in these cases
to demand a repayment is time critical, so the right could be lost unless
prompt action is taken.
Issues with the legal process for
The assessment of eligibility for
making a claim can be a fairly complex and time consuming exercise. In
particular, there have been changes in the way several of the Spanish
autonomous communities have charged SST over the last few years (mainly
reducing allowances for residents). This means that in a surprising number of
non-resident beneficiary cases, despite significant SST charges, no
discrimination can be shown.
Pending official guidelines, it is
considered to be essential that cases must be fully prepared and demands
submitted within 4 years of the date of the original tax payment, otherwise the
legal right to demand a repayment could be lost.
It should also be noted that the
reclaim would only be in relation to SST, not in relation to other Spanish
probate costs and taxes (eg. Plus Valia tax).
It is considered unlikely that the
Spanish Tax Authority will establish a rapid, simple and economical system for
processing applications for repayment. There will inevitably be detailed
documentation requirements; and certification of a receiving bank account will
The reclaim process is therefore
likely to be fairly lengthy. The consensus is that the period from commencing
the case to reaching a conclusion is likely to be typically in the region of 3
The process of demanding a repayment
is also likely to be fairly costly. Preliminary estimates are that, to assess/
initiate the process will be likely to involve a cost of a minimum of 250 Euros
per claim. And then the total cost of the reclaim process could be in the region
of up to 20-30% of the amount reclaimed in total. (Although some interest may
be recoverable, partly to offset the costs).
If a credit for the SST paid has
been obtained in the beneficiaries’ own country (for example, against UK IHT),
then this could undermine the Spanish case for demanding a repayment.
From initial discussions with
specialist practitioners in this area, the range of minimum cases (below which
they would not consider it worthwhile taking a case on) is between 1,500 Euros-
2,500 Euros SST paid (per beneficiary).
Of course, any entitled beneficiary
can pursue their own claim for any amount of SST which is reclaimable- with or
without professional representation. There is no minimum level. But independent
professional advice is always recommended, to ensure the case is worthwhile
pursuing; and is handled correctly.
Spanish legal proceedings generally
can be lengthy and complex; and therefore costly. So it is essential at the
outset of any Spanish legal case, to have a clear understanding of the costs
which will be incurred; and the chances of success, to avoid the risk of
‘throwing good money after bad’.
For Spanish probate cases currently
in progress, the obligation remains for beneficiaries to pay SST according to
the current Spanish law (even though not EU compliant); and then (maybe)
subsequently have the right to make a reclaim.
From the Spanish property owner or
beneficiary’s point of view, this situation is far from satisfactory. But the
EU Court Ruling has unavoidably created a ‘legal limbo’; pending fresh fiscal
legislation/ directions from Spain.
Many practitioners have concluded
that the SST reclaim process is likely to be so fraught with potential issues-
delays, costs, procedural uncertainty, that the number of individuals who will
pursue cases- and see them through to a successful conclusion- will be
It is anticipated also that some
beneficiaries will conclude that, irrespective of the potential legal
entitlement, they have drawn a line under completed Spanish probate cases; and
have little interest in reopening the cases; and/ or taking on the cost and
stress of embarking upon this Spanish legal process.
But, for those individuals who do
wish to pursue an SST reclaim, it is recommended to be in the hands of a
specialist professional, as any procedural errors could be fatal to the claim.
Another risk inherent in reclaim opportunities of this nature is that
non-specialist operators tend to ‘spring up’, even taking on claim cases with
no real merit, but charging hefty up-front fees. As with all professional
services providers, some investigation as to background, reputation and
professional regulation/ indemnity cover is essential.
This general commentary is not
intended to be exhaustive; and case-specific legal advice should always be
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:27:50
September 29th, 2014
The European Court of Justice has
ruled that the Spanish Tax Authority’s succession tax system conflicts with the
European Union principles of freedom of movement of EU individuals and
circulation of money within the EU.
Spain must comply with this EU Court
Ruling by making changes to its succession tax system, to become EU compliant
within 6 months. Otherwise, Spain will face financial penalties.
As yet, there has been no formal
response from the Spanish Tax Authority as to its proposals to comply with the
EU Court Ruling.
Spanish Succession Tax is not
administered centrally; or charged in a uniform way nationally; or at a single
rate; or subject to universal national allowances and reductions.
In many countries, the calculation
and charging of succession taxation is simplicity itself. However in Spain, it
is a highly complex system, which creates a great deal of uncertainty,
inconsistency and controversy.
At the heart of the complexity is
the fact that for Spanish residents, the responsibility for succession tax
administration lies with the 17 individual autonomous communities. Each
autonomous community has discretion as to charging basis; practice; and
This fiscal quagmire alone creates
bewildering inconsistencies across Spain.
But the further peculiarity,
(central to the EU Court Ruling), is that for non-Spanish residents, succession
tax is administered by the Central Spanish Tax Office, which strips from
non-Spanish residents, the more ‘generous’ succession tax allowances/
exemptions which the autonomous communities otherwise offer. So, for non-
residents, a meagre succession tax-free inheritance amount of just below 16,000
Euros per spouse/ descendent beneficiary is allowed. Any inheritance received
above that value is taxable.
And as a side issue of great
consternation, it has been acknowledged that many Spanish families living in
Spain also suffer discrimination under the current system, according to where
(in Spain) their family members live.
So the current system not only
unlawfully discriminates against non- Spanish owners of Spanish properties. For
Spanish families also, its haphazardness can be financially ruinous.
The ball is now in Spain’s court, to
see how they will react, in order to bring Spanish Succession Tax into line
with the EU requirements.
It remains to be seen whether this
will be by centralizing/ standardising administration or (if that is deemed too
radical), at least a harmonisation of practice across Spain; and/ or a switch
of criteria from individual place of residency to asset location.
• A period of just six months is
very tight indeed for Spain to implement a complete overhaul of- and radical
change to- its succession tax system.
• With Spanish elections on the horizon, it is perhaps unlikely the current
Spanish Government will progress matters with great dynamism. Any change will
benefit some, but disadvantage others. Succession tax can be an emotive issue
• If the six month deadline is not met, then Spain will face EU financial
penalties; but meanwhile, continue to administer succession tax on the current
• Pending fresh Spanish legislation/ directives, any individual wishing to
challenge a Spanish Succession Tax charge or to reclaim previously paid tax,
will presumably need to bring their own legal case, citing the EU Court Ruling.
• If (to comply with the EU Court Ruling) Spain reduces the succession tax
impact on non-residents, to be equal to the current impact on residents, then
not only would that add fuel to the fire for a potentially massive number of
reclaimants, but this would guarantee a reduced future fiscal income; therefore
being hugely expensive for Spain.
• Conversely, if Spain were to increase the succession tax impact on residents,
to be equal to the current impact on non-residents, then the issue of demands
for refunds could be conveniently complicated. And overall, this would
significantly benefit Spain by increasing future succession tax revenue.
• So, a feasible strategy for Spain could be: to leave matters as they are for
now; and just pay any EU fine for interim non-compliance. Then, after the
elections, introduce new national regulations to standardize succession tax,
with the emphasis on asset location rather than individual residency. And in so
doing, phase out resident reductions, to equalize the impact of succession tax
across the board.
• Perhaps a cynical posture, to react to the EU Court Ruling by increasing
succession tax impact. But with the stark choice between potentially facing a
huge fiscal loss; and increasing fiscal revenue, it would be surprising for
Spain to choose the former option.
• Ultimately therefore, the EU Court Ruling could mark a turning point, from
which the overall impact of succession taxation in Spain, (although
standardized in some form, to satisfy EU requirements), actually increases- in
particular for Spanish residents.
• In terms of reclaims for previously paid tax, even if a clear reclaim route
is established, if the reclaimants had received credits against fiscal
liability in their own countries (e.g. pursuant to double taxation relief
treaties), it is assumed that any Spanish reclaim application would be denied.
• It is also likely that if a clear reclaim route is established, the process
itself would be complex, lengthy and therefore expensive to pursue. It is
unlikely that the Spanish Authorities would be inclined to make it a rapid,
simple and economical process.
As regards Spanish inheritance cases
currently in progress, the current Spanish legal/ fiscal obligation continues,
pending fresh Spanish legislation/ fiscal directions. So, inheritors of Spanish
assets are legally obliged to continue to pay succession tax on the basis of
the current system- even though it has been determined by the European Court of
Justice to be operating contrary to EU rules!
An uncomfortable position for
inheritors in the meantime. And furthermore, if they fail to make tax payments
when due, they may face interest/ penalties on late tax payments. But then
having paid tax sums due, although there are certainty changes anticipated to
the Spanish succession tax system, the exact nature and timing of the changes
is uncertain. And finally, if any reclaim option does arise, it is likely to be
lengthy, complex and expensive to pursue.
We will report further as soon as a
decision on the way forward for Spanish Succession Tax is announced.
This general commentary is not
intended to be exhaustive; and case-specific legal advice should always be sought.
The Legal 4 Spain team provides a
full probate service for properties and other assets anywhere in Spain. We are
always happy to provide a competitive cost estimate in the first instance, on a
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:18:49
April 11th, 2014
Spanish tax law can
undoubtedly lead to very unfortunate fiscal consequences in the event of
inheritance by beneficiaries who are unrelated to the deceased- including
unmarried / same sex partners, particularly if the relationship is not
‘recognised’ with civil status.
So, the bad news is
that advisers who warn of the exposure to Spanish Succession Tax rate of 80%
(or even slightly more) are confirming what could theoretically happen.
However, it should be
stressed that such a high rate of taxation would only apply in the very worst
Spanish tax case scenario. For example, with a very high value Spanish estate;
already wealthy beneficiaries; and no family or marriage connection between the
deceased and the beneficiaries.
But in any event, even
with Spanish estates of more modest value, the impact of Spanish Succession Tax
can still be unexpectedly harsh. So, it’s clear that planning is essential in
all family situations involving Spanish property ownership, to prevent the risk
of legally avoidable Spanish tax liability arising.
owners of Spanish properties is complex and specialised area of Spanish legal
practice, and without the correct advice, major Spanish tax problems can easily
We are happy to talk
through any potential cases (without obligation). Together we can explore the
solutions that are available to achieve succession wishes, in a tax efficient
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 15:15:58
January 27th, 2014
In many cases, the
answer is: yes!
It is often possible
to deal with Spanish estate planning and structuring so as to reduce the impact
of Spanish Succession Tax within the Spanish Will.
If you have a Spanish
Will, this can assist in reducing Spanish Succession Tax in the following ways:
1. It ensures that you
have the flexibility you are legally allowed to select your beneficiaries; so
that the most tax advantageous succession route in the circumstances can be
identified and provided for.
2. It secures the best
legal basis for a fast and economical succession process, following a death.
This helps to ensure that the legal process can be completed within the very
tight timescales allowed under Spanish tax law. Conversely, any failure to
comply with the statutory timetable (for example, delays caused by not leaving
an up to date and valid Spanish Will) can expose beneficiaries to increased tax
liability, through the imposition of interest and penalties on the tax debt.
It is perfectly legal
and acceptable to organise your estate succession in Spain, so as to minimise
the exposure to Spanish Succession Tax- as far as legitimately possible in the
circumstances. In advising our clients, we consider all available routes to
achieve this. As our team is independent and not tied to any single process or
structure; we are able to provide objective and case- specific advice in each
individual client scenario. This ensures the most cost effective estate
planning solution within the constraints of each case.
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 14:23:37
September 16th, 2013
New European rules will come into
force on 17 August 2015, which affect the inheritance of Spanish assets of
non-Spanish individuals who die after that date.
These changes will benefit the
families of owners of Spanish properties who leave up to date, professionally
prepared and correctly worded Spanish Wills.
However, those who leave no Spanish Will;
or Spanish Wills which are out of date or do not take into account the new
Regulations, could leave significant problems and unintended consequences for
their families or chosen beneficiaries.
There are numerous benefits of the
new Regulations for non-Spanish owners of Spanish properties (provided that
their Last Wishes are validly expressed in the correct form of Spanish Will).
These benefits include:
• Non-Spanish nationals with
properties in Spain are officially entitled to exclude the restrictive Spanish
‘forced heirship’ succession law from applying to their families.
• Through Spanish Wills, significant opportunities are now allowed securely to
mitigate Spanish Succession Tax.
• Flexibility as to succession route is permitted in carefully drafted Spanish
Wills, to enable beneficiaries to elect the applicable succession route
following a death. This means the route which best suits family circumstances
and tax efficiency at the time, can be applied. This principle sits comfortably
with English nationals, who are allowed under English law to make certain
variations to deceased’s Wills, following their death.
• Confusion as to what constitutes ‘habitual residence’ (becoming the main
criteria for choice of law in Spanish inheritance) can be avoided. Certainty
and security in succession now prevails in Spanish estate planning.
Although these developments are
extremely positive for Spanish property owners (and those considering investing
in Spanish property); it must be emphasized that those who fail to obtain up to
date professional Spanish estate planning advice could fail to secure the
benefits of the new Regulations for their families or chosen beneficiaries.
Spanish Succession TaxPosted by Andrew Thu, February 02, 2017 14:17:45
April 8th, 2013
The issue in contention, which many
families with Spanish properties are very concerned about is that the amount of
Spanish Succession Tax payable by non- Spanish resident beneficiaries can
differ substantially from the amount payable by Spanish resident beneficiaries.
Where the individuals concerned are
European Union Citizens, there should not (according to European Law) be
discriminatory treatment on the grounds of residency/ non- residency.
A firm ruling is awaited from the
European Commission, but pending that, the anomaly remains that (whether or not
they are EU Citizens), non- Spanish resident inheritance cases are in practice
generally subject to significantly more onerous Spanish Succession Tax
We are monitoring the situation and
will advise our clients and contacts as and when there are further developments
in this regard.