This information will be of great interest to Spanish non-residents who have inherited or acquired by gift, assets or property in Spain, having paid for them Spanish Inheritance and Gift Tax (“IGT”), as they would be entitled to claim a tax refund. 

Judgment of the European Court of Justice of September 3, 2014, (ECJ case C-127/12, Commission vs. Spain) declares that Spanish IGT Law is against the principle of free movement of people and capital within the EU, as provided under Article 63 of the Treaty on the Functioning of the European Union (“TFEU”) and Article 40 of the Agreement on the European Economic Area (“EEA”). 

Spanish IGT is regulated at both, State level and regional level, by each Autonomous Community (“AtC”). As a general rule, the State legislation applies to non-residents. The AtC’s rules apply if there is personal or real connection with an AtC generally granting to Spanish residents several tax benefits that, in practice, allow them to pay much lower taxes than non-residents. The most relevant tax benefit is a 99% tax reduction, in force in most of the AtC that have led to discriminatory taxation for non-residents who may have paid 100€ when a Spanish tax resident, in the same circumstances may have only paid 1€. 

The ECJ Judgment will bring modifications to the Spanish IGT Law and to the laws that rule the Spanish Financing System. Additionally, its major importance for non-resident tax payers resides in the IGT refund to be claimed.