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Non-residents and residents in Spain equal before Gift and Inheritance Tax

On the 1st of January, 2015, Act 26/2014 came into force, amending the Income Tax obligations of Non-Residents. It establishes an important modification of the Inheritance and Gift Tax applicable to non-residents who reside in a European Union (EU) country or in the country of European Economic Area (EEA).

This new treatment of non-residents has been introduced in order to comply with the judgment of the Court of Justice of the EU, of the 3rd of September, 2014, which stated that Spain had infringed EU law in its treatment of non-residents. In effect, these groups have experienced a very different tax treatment from the Spanish state, regarding their assets both within and beyond Spanish territory.

Gift and Inheritance Tax

The amendment introduces a special system for non-residents in Spain, who live in another EU of EEA country, assuring that they are treated as favourably as residents in Spain.

In the case of an inheritance, where the deceased is a non-resident, the beneficiaries may benefit from the Spanish Regional legislation, which is much more favourable than the State legislation that would previously have been applicable.

In those cases in which the deceased is a resident in Spain, the legislation of the Spanish region in which he was resident will be applicable, this again being a more beneficial outcome than if State legislation were applied.

Regarding gifts made while both parties are living, when the gifts consist in real estate assets, the Regional legislation of the region in which the assets are located will be applicable. If the property is located in another EU or EEA country, the legislation of the Spanish region in which the taxpayers reside would be applicable.

If the gifts consist in movable assets, non-residents are entitled to the application of the regional legislation in which the referenced movable assets have been situated for the majority of the last five years.

Finally, taxpayers are required to submit a self-assessment (autoliquidación) of the applicable Inheritance and Gift Tax to the Government. At Lexland Lawyers we are delighted to advise you in meeting your tax obligations, so do not hesitate to contact us!

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