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EU court rules against Spanish inheritance tax discrimination
| Published: | 19 Sep at 6 PM |
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Expats with properties in Spain and holiday home owners are to benefit by an EU court ruling allowing them the same range of tax relief options as Spanish citizens.
Discrimination against non-residents as regards tax liabilities has long been an issue amongst UK expat property owners who spend time in both countries. By the use of tax relief options, residents’ taxes can be cut to around zero, but the same options have not been granted to part-time expat residents owning holiday homes.
The European Court of Justice stated that charging EU member state nationals a different rate than that charged to Spanish home owners goes against the ethos of the European Union, thus branding the practice as discriminatory, particularly as it applies to inheritance tax. Before the ruling, an 80 per cent difference existed between taxes due from residents and those due from non-residents.
The Spanish system allows the country’s 17 autonomous regions to amend laws set by the state, with many communities now classing residents as having lived in the region for at least five years. Non-residents must pay the far more expensive national rate of tax on gifts of property and inheritances.
Exemptions of as much as £500,000 from the state tax can mean that almost no tax is paid on a property inheritance, although amounts vary according to where the property is located. The state tax kicks in when a property is valued at more than £12,600, a huge difference which has affected around 60.000 British families.
The good news from the EU is that, if state tax has been paid by UK expats who’ve inherited property, the amount can be reclaimed. Spain has until next year to change its rulings, with January 2016 the cut-off date after which claims can be made, and the paperwork must be perfect as the Spanish tax authority will be looking for excuses not to pay.
Discrimination against non-residents as regards tax liabilities has long been an issue amongst UK expat property owners who spend time in both countries. By the use of tax relief options, residents’ taxes can be cut to around zero, but the same options have not been granted to part-time expat residents owning holiday homes.
The European Court of Justice stated that charging EU member state nationals a different rate than that charged to Spanish home owners goes against the ethos of the European Union, thus branding the practice as discriminatory, particularly as it applies to inheritance tax. Before the ruling, an 80 per cent difference existed between taxes due from residents and those due from non-residents.
The Spanish system allows the country’s 17 autonomous regions to amend laws set by the state, with many communities now classing residents as having lived in the region for at least five years. Non-residents must pay the far more expensive national rate of tax on gifts of property and inheritances.
Exemptions of as much as £500,000 from the state tax can mean that almost no tax is paid on a property inheritance, although amounts vary according to where the property is located. The state tax kicks in when a property is valued at more than £12,600, a huge difference which has affected around 60.000 British families.
The good news from the EU is that, if state tax has been paid by UK expats who’ve inherited property, the amount can be reclaimed. Spain has until next year to change its rulings, with January 2016 the cut-off date after which claims can be made, and the paperwork must be perfect as the Spanish tax authority will be looking for excuses not to pay.
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