For inheritance and gift tax by… rulings dated February 19, and March 21 and 22, all of 2018, the Spanish Supreme Court (“TSE”) resolved to allow those persons with residence outside the European Union (“EU”) or, alternatively, the European Economic Area (“EEA”), to benefit from the regional allowances of the inheritance and gift tax (“ISD”) applicable in Spanish territory.
ISD is the regional tax levied on the acquisition of assets located in Spanish territory, either by inheritance (inheritance or legacy) or by donation. As it is a tax that is applied regionally, the Autonomous Communities are empowered to establish tax incentives with respect to this tax, which sometimes leads to large differences in the amount to be paid.
Prior to these rulings, the ISD tax incentives (rebates or exemptions) were applicable only and exclusively, at first, to residents for tax purposes in Spain. Subsequently, as a result of the 2014 ruling of the Court of Justice of the European Union, its application was extended to EU residents (EU and EEA), but leaving out residents from other parts of the world.
The relevance of the 2018 EAT rulings lies in the fact that taxpayers resident outside the EU or EEA may also be subject to these tax incentives. In other words, residents of Mexico for tax purposes could benefit from the tax incentives of the Spanish ISD.
Thus, for example, a resident for tax purposes in Mexico could request a refund of amounts unduly paid to the Spanish tax authorities. The difference or surplus paid would have to be refunded, thus avoiding discrimination or inequality based on residence.
According to the above, if within the last four (4) years a resident for tax purposes in Mexico received, via inheritance or donation, assets that are located in Spanish territory, and paid the ISD corresponding to the Autonomous Community, the possibility of requesting a refund of the amounts unduly paid could be explored.
The specific case will have to be analyzed in depth, since the location of the property and the applicable legislation of the Autonomous Community are of the utmost relevance. We have Spanish firms with whom we normally collaborate and who could support us with this procedure.
