Tax claim on Inheritance & Gift Tax
(Non residents in the European Union / European Economic Area).
As is well known, within the scope of their power, Spanish Autonomous Communities have approved tax incentives within the scope of the Inheritance & Gift Tax, which implies improvements in the general tax regime.
It is known 99% tax rebate established by the Autonomous Community of Madrid for inheritances (and certain gifts) when the heirs or donees are either the spouse, or the children or the grandchildren, among others.
In principle, these autonomous tax incentives were applied only when the heirs or donees were tax resident in Spain. As a result of the Judgement by the European Union Court of Justice, regulation had to be changed in order to allow as well the heirs or donees resident in the Member States of the European Union or in the European Economic Area (EEA). By doing that it was possible to avoid discrimination prohibited by European law.
Last February 19, 2018, Spanish Supreme Court declared that the principle of free movement of capital prevents limiting the application of such rule to the residents in other States outside the European Union or EEA. This ruling has been reaffirmed in later judgements by the Spanish Supreme Court.
From the above it follows the possibility that residents in other States outside the European Union or EEA can reclaim refunds of the amounts overpaid mainly in the last four years.
We have to examine the practical possibilities of tax refund on a case-by-case basis, as it is not possible to provide general rules in view of the different situations that may arise.