discriminacion fiscal

End of fiscal discrimination for non-residents in matters of succession.


At the beginning of this year, modifications made on the regulations about Inheritance came into force, in attention to the need to adjust the State inner rules to the international obligations derived from our belonging to the European Union. On the 3rd of September 2014 the European Court of Justice passed an Order, with respect to Taxation on Inheritance in Spain, related to the case C-127/12, in which our regulation was considered to be against the free movement of capital, since there were differences on taxation between those successors or beneficiaries who were residents and those who were non-residents in Spain and between donations and similar dispositions of assets located in Spain and those located abroad.

The reason for this is the fact that the Act 29/1987 (on Inheritance and donation taxation), allowed to different Communities to fix allowances which were in application only in those cases with an exclusive connection with the territory belonging to the Community in question, this way the Inheritance or donation in which the successor or beneficiary or the deceased were not living in Spain or an Inheritance or donation whose object is a property located abroad, they were not allowed to benefit of the allowances, due to the fact the law in application in these cases was the one of the State (without allowances), and that was considered for the Court of Justice as a different treatment against the European Law. In response to this, the Act 26/2014 of 27th of November, which modifies the Act 32/2006 of 28th of November on the Income Tax for Natural Persons, the revised text on the Law on Income Tax for non Residents, passed by the Royal Legislative Decree 5/2004 of the 5th of March, and other rules on taxation, has included a Third Final Provision, which in turn provides new wording for the second additional provision of Law 29/1987 (ISD Act), which materializes the legal obligation of compliance which is derived from the above mentioned Order, matching the treatment given to those residents in Spain to residents in the territory of the European Union and European Economic Area through a series of rules that allow them to be placed in the same legal position as resident taxpayers. In acquisitions mortis causa, for example, the rules of the Autonomous Community in which the deceased was resident shall apply, being able to apply any tax benefits established by the Autonomous Community in question, both taxpayers resident in Spain as residents in the territory of the European Union and European Economic Area. Another example, nowadays it is no longer possible for the son of resident in the same place as his late father to apply a rule, the one of the Autonomous Community and to his brother resident in another member state of the European Union to have the rule established by the State in application, generally more restrictive in terms of tax benefits.

Finally, it should be noted to this effect that the concept of residence in one Autonomous Community, as it is shown by the Order itself, is the corresponding to the place where a person has lived most days over a period comprising the five years preceding the day prior the accrual. The Valencian Community meanwhile, after the pronouncement of the Court of Justice of the European Union on the 3rd of September 2014, and we understand that motivated by the question of unconstitutionality raised by the Supreme Court against certain provisions of its regional regulations on ISD, undertook at the end of 2014 amendments intended to eliminate discrimination between