With this entry I update and recast other previous ones, and thus we deal with the situation in which the taxation of inheritances and donations from non-residents in Spain remains, reviewing the path traveled since Law 29/1987 of December 18, on Inheritance Tax and Donations until the current situation that concludes, after passing through Law 26/2014, with Law 1/2021, of July 9, on prevention measures and the fight against tax fraud.
In this regard, the judgment of the Superior Court of Justice of the European Union of September 3, 2014, (Case C-127/12), which considered that the Spanish legislation on inheritance tax and inheritance tax did not conform to Community law, was of the utmost importance. donations, by allowing differences in the tax treatment of donations and successions between successors in title and donees resident and non-resident in Spain, between resident and non-resident deceased in Spain and between donations and similar dispositions of real estate located in Spanish territory and outside of it.
A.- THE SITUATION OF ORIGIN (LAW 29/1987 OF DECEMBER 18)
With this regulation, only, the taxation of non-residents in Spain was established, in the inheritance and donations tax, (by real obligation), for the acquisition of goods and rights, whatever their nature, that were located, could be exercised or had to be fulfilled in Spanish territory, as well as for the perception of amounts derived from life insurance contracts when the contract has been carried out with Spanish insurance entities or has been entered into in Spain with foreign entities that operate in it.
Once the obligation to pay taxes was established and given that at that time the regulatory regime for the taxation of inheritances and donations was unique throughout Spain, there was no element of discrimination between residents and non-residents, since both paid the same.
This situation is modified by Law 14/1996, of December 30 which transfers to the Autonomous Communities the performance of certain taxes, specifically in the case of inheritances and donations, in the case of taxpayers residing in Spain, at the same time that it gives them a certain legislative competence, today established more deeply by Law 22/2009, of December 18, which granted the Autonomous Communities the possibility of regulating the following aspects of inheritance and gift tax, such as: a) Reductions in the tax base; b) Tax rate; c) Amounts and coefficients of the pre-existing patrimony; and d) Fee deductions and allowances.
In the exercise of their powers, most of the Autonomous Communities made an effort to adapt the inheritance and donation tax laws to the needs of citizens, unlike the state legislator who left the law practically unchanged since 1987.
The consequence of this is that the autonomous regulations of the place of death of the deceased or of the place where the donated goods were located were applied to residents in Spain, while to non-residents, when acquiring goods and rights, whatever their nature, that were located, could be exercised or had to be complied with in Spanish territory, state regulations were applied to them.
Let's give an example of this situation:
In 2013, a deed of partition of the inheritance of a man residing in Catalonia, who died leaving a wife and three daughters, and with a patrimony consisting of three houses in the capital and some money savings, was formalized in my Notary.
This seemingly normal situation was clouded because one of the daughters had studied outside of Spain and after a while ended up living in Germany, where she worked and raised her family, while the other two sisters lived in Spain.
As usual in my Notary's Office, a tax approach was made of the entire operation, and it turned out that the two sisters who lived in Spain did not have to pay anything, due to inheritance tax, while the other sister who lived in Germany came out to pay a not inconsiderable fee, around 7,600 euros.
¿Why did this situation occur when all the sisters inherited the same?
The reason was that the tax legislation of Catalonia was applied to those who resided in Catalonia and therefore they were entitled to reductions in the tax base of 100,000 euros, with which what they received did not reach the minimum to pay, while to those who resided in Germany, state legislation was applied and they were only entitled to a reduction in the tax base of 15,956.87 euros, which gave them a taxable base of approximately 69,043.13 euros, and on that amount they had to pay approximately 11%, giving rise to the fee that we have said before.
B.- THE JUDGMENT OF THE COURT OF JUSTICE OF THE EUROPEAN UNION, OF SEPTEMBER 3, 2014 (CASE C-127/12).
The Judgment of the Court of Justice of the European Union, of September 3, 2014 (case C-127/12), touched on the waterline the tax regime of non-residents in Spain, in inheritance taxes and donations, since it considered that Spanish legislation (the one described in the previous section) was contrary to articles 63 of the TFEU and 40 of the agreement on the European economic area of May 2, 1992, by allowing differences in the tax treatment of donations donations and successions between assignees and donees resident and non-resident in Spain, between deceased residents and non-residents in Spain and between donations and similar provisions on real estate located in Spanish territory or outside it.
With this ruling, the tax regime was eliminated, by real obligation, in the case of the acquisition, by inheritance or donation, of goods and rights, whatever their nature, that were located, could be exercised or had to be fulfilled in Spanish territory. , by community residents, in the same way that the existence of a plurality of tax regimes within the Spanish State, in terms of inheritance and donations, was considered in accordance with community regulations.
C.- LAW 26/2014. THE END OF DISCRIMINATION AGAINST “COMMUNITY” RESIDENTS
As a consequence of the Judgment of the Court of Justice of the European Union, of September 3, 2014, indicated in the previous section, the Spanish legislator had to face the modification of its own laws on the matter, and there were several options that had from the point of view of legislative policy:
1.- The first was a unification of the national legislation on inheritance and gift tax;
2.- The second was a modification, through Law 22/2009, of December 18, of the rules that regulate the applicable legislation, when we are dealing with successions and donations in which non-residents in Spain may be interested.
3.- One The third was to have regulated the entire state regime for the taxation of inheritances and donations, in a more appropriate way for current times, since it must not be forgotten that the element of discrimination that was the cause of the sentence derives from the total disparity of existing reductions between state regulations and those of the autonomous communities
Without going into further assessment, the legislator accepted as an option and through Law 26/2014, to apply in cases of state competence the regulations of a certain autonomous community, and thus established, through the modification of the 2nd Additional Provision of the Law 29/1987, the following regulations:
SUCCESSIONS WITH NON-RESIDENT CAUSE
a) In the case of the acquisition of assets and rights by inheritance, legacy or any other succession title, if the deceased had been resident in a Member State of the European Union or the European Economic Area, other than Spain, taxpayers will have the right to the application of its own regulations approved by the Autonomous Community where the greatest value of the assets and rights of the relict estate located in Spain is found. If there is no property or right located in Spain, the regulations of the Autonomous Community in which they reside will be applied to each taxpayer.
INHERITANCES WITH NON-RESIDENT OWNER
b) In the case of the acquisition of assets and rights by inheritance, legacy or any other succession title, if the deceased had been a resident of an Autonomous Community, non-resident taxpayers, who are residents of a Member State of the European Union or of the European Economic Area, will have the right to apply their own regulations approved by said Autonomous Community.
DONATIONS OF REAL ESTATE IN SPAIN IN FAVOR OF NON-RESIDENTS
c) In the case of the acquisition of real estate located in Spain by donation or any other legal transaction free of charge and "intervivos", non-resident taxpayers, who are residents of a Member State of the European Union or the European Economic Area , will have the right to apply their own regulations approved by the Autonomous Community where the aforementioned real estate is located.
DONATIONS OF REAL ESTATE ASSETS OUTSIDE SPAIN IN FAVOR OF RESIDENTS
d) In the case of the acquisition of real estate located in a Member State of the European Union or the European Economic Area, other than Spain, by donation or any other legal transaction free of charge and “inter vivos”, taxpayers residing in Spain They will have the right to apply their own regulations approved by the Autonomous Community in which they reside.
DONATIONS OF MOVABLE PROPERTY IN SPAIN IN FAVOR OF NON-RESIDENTS
e) In the case of the acquisition of movable property located in Spain by donation or any other legal transaction free of charge and "intervivos", non-resident taxpayers, who are residents of a Member State of the European Union or the European Economic Area , will have the right to apply the regulations approved by the Autonomous Community where the aforementioned movable assets have been located for a greater number of days of the immediately preceding five-year period, counted from date to date, ending on the day before the date of accrual of the tax.
In any case, in these cases, the administrative competence continued to be state and thus the taxpayers had to fulfill their obligations for this tax to the State Tax Administration, presenting a self-assessment, performing the necessary operations to determine the amount of the tax debt and accompany the document or declaration in which the taxable event is contained or verified. At the time of presenting their self-assessment, they must pay the resulting tax debt in the place, form and deadlines determined by the regulations by the Minister of Finance and Public Administrations.
D.- The judgment of the Supreme Court of February 19, 2018.
Law 26/2014 left as a possible element of discrimination the situation in which the taxation in Spain of inheritances and donations remained, when they were interested in the same non-residents in Spain, and that they are not residents of a country that is a member of the European Union or that is part of the European Economic Area.
This situation was addressed by the judgment of the Supreme Court, contentious chamber (ROJ 550/2018) of February 19, 2018, in which the applicability to the case of a person residing in Canada who inherits assets in Spain was debated, of the effects of the TSJUE judgment of September 3, 2014.
The sentence, which is very protracted in arguments and quotes from other judgments of the Court of Justice of the European Union, starts from the criterion invoked by the appellant and upheld by the CJEU in its judgment of October 17, 2013, case C-181/12, in the that a question is raised for a preliminary ruling by a German Court on the interpretation of arts. 56 CE and 58 CE (current articles 63 and 65 TFUE), in the lawsuit filed by the successor in title of a Swiss citizen, both resident in Switzerland, in relation to the settlement of inheritance tax relating to a property located in Germany.
Based on this consideration, I pointed out the sentence and I quote literally that:
1.- «from repeated jurisprudence it appears that, with regard to inheritance, the measures prohibited by article 56 EC, section 1, for constituting restrictions on the movement of capital, include those that cause a decrease in the value of the inheritance of a resident of a State other than the one in whose territory the affected assets are located and who subjects the acquisition by succession of these to taxation.
2.- "(...), the regulations of a Member State that make the application of a reduction in the tax base of the succession or donation of the place of residence of the deceased and the successor in title depend on the application at the time of death, or the place of residence of the donor and the donee at the time of the donation, or also the place where an immovable property object of succession or donation is located, when it gives rise to successions or donations between non-residents, or whose object is immovable property located in another Member State, bear a higher tax burden than inheritances or donations in which only residents are involved or which only have immovable property located in the Member State of taxation as their object, constitutes a restriction of the free movement of capital ».
3.- That circumstances may arise that justify the existence or maintenance of restrictions regarding the movement of capital, particularly with respect to third countries, which must be subject to a strict interpretation.
But that real estate investments of a patrimonial nature, made for private purposes unrelated to the exercise of an economic activity (as is the case of inheritances and donations), are not included in the scope of application of the aforementioned art. 57, paragraph 1.
With this sentence, the tax treatment of inheritances and donations from non-residents in Spain was equalized, but without a rule that would protect it.
E.- THE CURRENT SITUATION. LAW 1/2021, OF JULY 9, ON PREVENTION MEASURES AND THE FIGHT AGAINST FISCAL FRAUD.
As a consequence of the Judgment of the Supreme Court indicated in the previous section, the Spanish legislator has had to face, once again, the modification of its own laws on the matter, and thus by means of a new wording of section one of the additional provision The second of Law 29/1987 equates the tax treatment of inheritances and donations from non-residents, whether they are in a Member State of the European Union or the European Economic Area or in a third State, maintaining state jurisdiction, through the establishment of the following connection points:
SUCCESSIONS WITH NON-RESIDENT CAUSE
In the case of the acquisition of assets and rights by inheritance, legacy or any other succession title, if the deceased had been a non-resident in Spain, the taxpayers will have the right to apply their own regulations approved by the Autonomous Community where they are located. the highest value of the assets and rights of the relic estate located in Spain. If there is no property or right located in Spain, the regulations of the Autonomous Community in which they reside will be applied to each taxpayer.
SUCCESSIONS WITH NON-RESIDENT OWNERAND
In the case of the acquisition of assets and rights by inheritance, legacy or any other succession title, if the deceased had been a resident of an Autonomous Community, non-resident taxpayers will have the right to apply the regulations approved by said Autonomous Community.
DONATIONS OF REAL ESTATE IN SPAIN IN FAVOR OF NON-RESIDENTS.
In the case of the acquisition of real estate located in Spain by donation or any other legal transaction free of charge and "inter vivos", non-resident taxpayers will have the right to apply their own regulations approved by the Autonomous Community where the aforementioned assets are located. estate.
DONATIONS OF REAL ESTATE ASSETS OUTSIDE SPAIN IN FAVOR OF RESIDENTS
In the case of the acquisition of real estate located outside of Spain by donation or any other legal transaction free of charge and "inter vivos", taxpayers residing in Spain will have the right to apply their own regulations approved by the Autonomous Community in the that they reside
DONATIONS OF MOVABLE PROPERTY IN SPAIN IN FAVOR OF NON-RESIDENTS
In the case of the acquisition of movable property located in Spain by donation or any other legal transaction free of charge and "inter vivos", non-resident taxpayers will have the right to apply their own regulations approved by the Autonomous Community where they have been located. the aforementioned movable property a greater number of days of the period of the immediately preceding five years, counted from date to date, ending the day prior to the accrual of the tax.
CONCEPT OF RESIDENT.
Individuals residing in Spanish territory will be deemed to be resident in the territory of an Autonomous Community when they remain in its territory for a greater number of days of the immediately preceding five-year period, counted from date to date, ending on the day before the accrual.
