The Spanish Supreme Court, on February 19th 2018, has issued a sentence confirming that Spanish Inheritance and Gifts Tax Law is against the free movement of capital stated by the European Union Treaty

The Spanish Supreme Court, on February 19th 2018, has issued a sentence confirming that Spanish Inheritance and Gifts Tax Law is against the free movement of capital stated by the European Union Treaty, in cases in which the taxpayer is located in a non-European Union/European Economic Area country.

Note that, according to the Spanish Inheritance and Gift Tax regulations, the different regions ("Comunidades Autónomas") of Spain have the authority to adopt local legislation regarding some aspects of the mentioned tax (mainly reductions of the tax base, tax rates and reliefs of the tax quote).

At this regard, the tax rates and the reliefs approved by the different regions of Spain are more advantageous than those established in the general sets of rules.

The Spanish Supreme Court bases its interpretation on the articles 63 and 65 of the Treaty on the Functioning of the European Union and, among others, on the cases C-127/12, C-181/12 and C-513/03 of the European Court of Justice.

The article 63 lays down the key point of the grounds stated in the abovementioned judgement: "Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited."

As a practical approach, on the basis of the judgement issued by the Spanish Supreme Court, the non-EU/EEA citizens are entitled to apply the legislation of the Spanish region where they have received the inheritance or gift.

This allows all non-EU/EEA taxpayers who in the past four years  have had to pay the Inheritance and Gift Tax according to State regulations to ask for the refund of the taxes paid in excess of the ones they should pay if they have applied local regulations. Interest over the taxes paid in excess can be asked in the refund claim.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.