It is well over 2
years now, since the European Court of Justice’s Ruling, that the Spanish Tax
Authority’s succession tax system conflicted with the European Union principles
of freedom of movement of EU individuals and circulation of money within the

That case was
specifically in relation to the distinction the Spanish Tax Authority
previously made between those who were resident in Spain; and those who were

The Ruling was that
Non-Spanish Residents (who were also Europeans) should be treated in the same
way as Spanish residents, for the purposes of Spanish Succession Tax.

Following the Ruling,
Spain revised its practice, as required; and now (for example), British owners
of Spanish properties are treated in the same way for Spanish Succession Tax
purposes, irrespective of whether or not they are resident in Spain.

But although the
Spanish Tax Authority is now compliant in terms of the Spanish residency/ non-
Spanish residency distinction, there remains a separate glaring inconsistency
in approach, which also amounts to discriminatory treatment of EU individuals.

That is the different
levels of Spanish Succession Tax impact, according to which Autonomous
Community within Spain is the charging Tax Authority in the case in question.

Continuing Discrimination

In many countries,
the calculation and charging of succession taxation is simplicity itself.
However in Spain, it is a highly complex system, which creates a great deal of
uncertainty, inconsistency and controversy.

Spanish Succession
Tax is not always administered centrally; nor is it charged in a uniform way
nationally; nor is it charged at a single rate; nor is it subject to universal
national allowances and reductions.

At the heart of the
complexity is the fact that for Spanish nationals/ Spanish residents, the
responsibility for Succession Tax administration lies with the 17 individual
autonomous communities within Spain. Each autonomous community has discretion
as to charging basis; practice; and allowances/ exemptions.

This fiscal quagmire creates
bewildering inconsistencies across Spain. On the attached image, the Spanish
Succession Tax impact is indicated, based on the same Estate details, but
varying according to which is the applicable Autonomous Community.

And, as a very
noteworthy side issue, it is not only foreign owners of Spanish properties who
are exposed to the unfairness of this perplexing system; but it has been
acknowledged that many Spanish families living in Spain themselves suffer this
arbitrary discrimination under the current system, according to where (in
Spain) their family members live.


It remains to be seen
whether this very worrying anomaly will be regularised by centralizing/
standardising administration of Spanish Succession Tax; or (if that is deemed
too radical), at least a harmonisation of practice across Spain.

For non- Spanish
owners of Spanish properties, they are fortunate, in that there are
opportunities in Spanish Wills and estate planning, to mitigate this exposure
to Spanish taxation; and expert advice is recommended to ensure that the fiscal
impact is minimised; in planning for future inheritance.

This general
commentary is not intended to be exhaustive; and case-specific legal advice
should always be sought.

The Legal 4 Spain
team provides a full Wills, Estate Planning and Probate service for properties
and other assets anywhere in Spain. We are always happy to provide a
competitive cost estimate in the first instance, on a no-obligation basis.