Spain May Be Forced To Change Their Inheritance Tax Exemptions

Recent rulings by the ECJ have seen non-resident property owners benefit from having the same tax conditions imposed as their resident counterparts in how they are taxed on caiptal gains and income tax. Now it appears that they too could benefit from having the same exemptions from inheritance tax and gift tax.

Over the past few years there has been a shift in how Spanish residents are are taxed for inheritance tax and gift tax purposes which now sees almost total or full exemption for assets passed to a living spouse or child.

The ECJ have taken an interest in this situation as the exemptions are not applicable to non-residents who are taxed at progressive rates from 7.65% to 34%. Rates can increase even higher depending on the relationship between the beneficiray and the benefactor.

The Spanish inheritance tax issue has led to huge number of indiviudals establishing companies and off-shore trusts within which a property is purchased as a vehicle to avoid inheritance tax but all this could change if the ECJ imposes their intended action.

The ECJ's argument is that the current system is contrary to Community Law and that all EU citizens should be treated equally.