The European Commission has announced that it is bringing Spain before the European Court for ‘discriminatory rules relating to Inheritance and Gift Taxes’. The source of the problem lies in the fact that Spain permits non-resident European Union citizens to pay higher taxes than those resident in Spain.
The news follows two separate warnings from the Commission -in 2010 and 2011 – directed at Spain to take measures necessary to ensure that Spanish Inheritance Tax laws conformed with the free movement of European Union citizens. The Spanish laws which are the subject of the legal action were in fact enacted by the regional governments in Spain, following the derogation of responsibility for inheritance and gift taxes by the central government in 2001.
Over several years regional governments have gradually reduced or eliminated the taxes payable in respect of an inheritance or gift made to a resident of that region or of Spain, depending on the specific rules enacted. Those beneficiaries resident outside Spain however, have been forced to rely on less generous exemptions and deductions originally formulated by the central government.