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European Justice Dictates That The Inheritance Tax Violates The Law

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European justice declares that the Inheritance and Gift Tax partly violates the Community legislation. The Luxembourg Court ruled last September 3rd 2014 that the tax -state tax given up to the Spanish autonomous regions- is contrary to Community law for forcing residents to pay more in another member State. Most of Spanish autonomous regions offer deductions on this tax which only the residents in that region can take benefit of. Thus, residents in another EU country or owners of properties located outside the national country are forced to pay the state portion, higher than the autonomic.

The Court of Justice of the European Union (ECJ) considers that there is "no objective difference that could justify this difference in treatment" between the situation of a resident and that of a non-resident or between a property located in the country and a property that is outside of Spain. "Differences in treatment leads to discrimination," says the sentence.

European justice agrees with the European Executive, which brought the case to Court in 2012, and considers that there is a "restriction" on free movement of capital, one of the pillars of the construction of the EU Community- regardless of the autonomous regions having carried out or not reductions on the tax rates.

The sentence, on which no appeal is possible, is mandatory for Spain. A spokesman for the Ministry of Finance and Public Administration recognizes the "complexity" involved in adapting it in the present time and states that the technicians are already discussing the possibilities for the correct application of the ruling.

Following this resolution, the possibility of requesting for the refund of the amount paid (or part of the amount paid) is offered to many heirs that have paid the Tax under these regulations that are now declared illegal. The procedure for request for the refund is different from the time that has elapsed since the payment of the tax. It is easier for those cases where less than four years has passed since the payment was made.

In case you are interested in getting further information on this issue or you are affected by this resolution, please contact Manzanares Abogados for a detailed study of the situation. 

Source: El País