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Spanish Inheritance Tax Refunds

A ruling of the European Court of Justice in September 2014 found that the Spanish Inheritance Tax system is discriminatory to non-residents of Spain and in breach of EU law.
This has opened the door for thousands of British people (and other nationalities too!) to claim a refund of the Spanish Inheritance Tax they have paid.

Why?

Under Spanish law, when someone dies owning assets in Spain the beneficiaries of their estate individually pay Spanish inheritance tax on the amount they have inherited.

The amount of inheritance tax payable by each beneficiary is decided by either:

a)     the rules of the state; or

b)     the rules of one of Spain’s 17 self-governing regions.

The amount of inheritance tax a beneficiary has to pay under the state rules is generally significantly higher than the amount they have to pay under the regional rules. 

The reason why the Spanish inheritance tax system was found to be discriminatory is because the laws of the regions do not apply to non-residents of Spain and the harsher state law is applied to non-resident’s instead.

This means that if either the beneficiary or the deceased person was a non-resident of Spain, the beneficiary would have to pay more inheritance tax than they would if they were a Spanish resident.

The ruling means that people who have had to pay a higher rate of Spanish inheritance tax under the state rules because of the their non-resident status could be entitled to a refund. 

Who can claim?

If you have inherited from an estate of someone who died owning assets in Spain (including a holiday home or other property) you could be entitled to a refund if:

You have paid Spanish Inheritance Tax within the last 4 years AND either one of the following statements is true:

  • You are not a Spanish resident, or
  • The person whose estate you inherited was not a Spanish resident.

How much will be refunded?

The amount of the refund will depend on which one of the 17 region’s rules would have been applicable if you and the deceased person were Spanish residents.

The amount of the refund is essentially the difference between the money paid as a non-resident under the state tax rules and what they would have paid had under the particular region’s tax rules. This can be up to 100% of the tax paid and in many cases this is tens of thousands of pounds.

What should you do if you think you are eligible to claim?

Making a Spanish Inheritance tax refund claim is not an easy process and each claim has to be individually submitted to the Spanish Tax Administration. It is likely to be worthwhile however as claims can be for several thousands of pounds.

There is only a very short window in which refunds for overpaid Spanish Inheritance Tax can be claimed and strict time limits for each stage of the process so you should make sure that you do not delay making your claim.

You are only allowed one attempt at submitting a tax reclaim so if there is a mistake or if it is incorrect you will lose the opportunity to make your claim. You should therefore get assistance from a Spanish tax lawyer who has experience dealing with similar cases and familiar with the procedures.

Is it expensive to make a claim?

Not necessarily. Many firms will undertake the work on a No Win No Fee basis which means that you will not have to pay for the lawyer’s services unless you are successful and receive a refund.  The lawyer will usually take a percentage of the amount of the inheritance tax recovered if you win. You should make sure you agree with the lawyer how much this will be before instructing them.

You may also be able to receive a free review of your circumstances to find out if you are eligible to claim and, if so, how much.

Author: Sara Janion

Worldwide Lawyers

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to Worldwide Lawyers directly.

Published on 19th December 2014
(Last updated 28th March 2018)

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