07/10/14 0:00
It's not the first time that the European Union (EU from now on) has sued Spain regarding the Inheritance and Donation's Tax (IDT from now on). The first occasions were in the years 2010 and 2011 when the EU asked our Tax Authorities several times to modify the internal legislation (Law 29/1987, of 18th of December, of the IDT),due to the fact that it was infringing the European legislation which guarantees the freedom of capital movement. Request that the Spanish Government ignored. That was a great opportunity to solve the things by the easy way when the first doubts arose in Brussels regarding the adequacy of our internal laws to the EU's laws.
This time the EU is not requesting, but declaring in a sentence from the Court of justice of the EU of the 3rd of September nº C-127/2012 that , " 63 of the Treaty on the Functioning of the European Union (TFEU) and article 40 of the European Economic Space Agreement (EESA) of 2nd of May 1992, by permitting the establishment of differences in the tax treatment of inheritances and donations between the resident and non-resident inheritors and donees, between the resident and non-resident deceased and between Real estate donations placed in the Spanish territory and outside Spain.". As the sentence literally says: "A State's legislation that makes the application of a reduction of the taxable base depend on the place of residence of the deceased in the moment of his/her death and/or on the donee's place of residence when the donation's being done, or also on the place where the real estate that's being transferred is located, when it leads to a higher taxation for the inheritances or donations between non-residents than the ones where only Spanish residents intervene or that its' object is a real estate placed in Spain, it constitutes a restriction of capital freedom." And the thing is that, nowadays, twenty different IDT tax regimes coexist in Spain, fifteen common regimes, one in Navarra, three in the Basque Foral Councils and the worse, the one that's applied to non-residents, established by the Central State, in which there are no applicable rebates. In this sense, we have to remind the reader that the State promulgated the law that provided the backbone of the IDT. Each Autonomous Community has been transferred the competence to fix the tax rates and the applicable rebates for the residents of the community, so, by discard, to the only ones to whom the State Law applies (the most burdensome) is to non-residents. Our Authorities, besides not listening to the European Commission, didn't pay attention to what was happening those days in Europe: The same case was brought up in Germany in the wake of a judicial proceeding between a Swiss tax resident and the German Tax Administration. The Court of Justice of the EU in its sentence of the 17 of October of 2013 settled the prejudicial question presented about if the German legislation regarding IDT could be considered contrary to the European Constitution for the mortis causae acquisitions of goods located in Germany because the German Laws established a reduction in the IDT's taxable base of the German Tax residents much higher than the one permitted to non-residents, provoking an inevitable diminution of their heritage's value. The Court of Justice considered that the German legislation constituted a limitation of the European basic principle of capital freedom established by article 56. Last 8 of January it was ready to sentence the European Commission's claim against Spain for discriminating non-residents with the IDT. The European Union sued Spain by means of an appeal (Issue C-127/12), asking to declare that Spain had infringed articles 21 and 63 of the TFEU and articles 28 and 40 of the EESA, According to the Court of Justice of the EU, the Spanish IDT legislation contravenes the EU's rights because, only to Spanish residents effects, it transfers the IDT to the Autonomous Communities making possible the introduction of tax advantages that are applied only according to the residency of the person who passed away or the donee, or the place where the goods are, breaching the principle of freedom of movement of capitals and persons, determining this way the right to choose where to reside or how to materialize the investments. The Court of Justice maintained that even though article 65 of the TFEU permits the States to apply dispositions that distinguish between tax payers whose situation differs with respect to their place of residence o with respect to the places where their capital is invested, that's an exception to article 63 that guarantees the free circulation of capitals and that in Spain's case tax payers with comparable objective situations are being discriminated, without concurring the proportionality and rationale requirements. We will put an example so that the reader can realize to what extent the actual Spanish legislation discriminates the non-resident community. The example will be of a British non-resident tax payer that receives from his father by means of a inheritance a real estate situated in Menorca valued in 200.000,00 €. The non-resident will pay nowadays € more IDT than a Balearic tax resident: The people who are benefited by this sentence for the difference of the paid amounts according to the state's legislation and the amount that would correspond to the Autonomous Community, generally of the place where the goods are placed, only if they correspond to the four last years open to tax inspection, and in case the four years period has elapsed they still will be able to start a process of financial liability against the State for having applied a national law that has been confirmed against the Rights of the EU. Having this sentence before us now is not very easy to foresee in which way our internal legislation will be updated to the EU laws. The most recent news are that, at the date we are writing this article (01/10/2014), The Popular Political Party (PP) has submitted a package of amendments to the articles of the Law Project by which the Personal Income Tax and the Non-Resident Personal Income Tax will be modified and that's being debated in the Parliament. What we can clearly ensure is that the Sentence has awaken the interest of the non-resident that have borne the IDT , now declared as undue, in requesting the paid in excess, fact that the specialized Tax Offices are confirming.
