One of the aspects that usually generates doubts in Inheritance and Gift Tax (ISD) is how it affects the residence of the beneficiary, that of the testator and the location of the inherited assets.
The first point to determine is the tax residence of the taxpayer (the recipient of the inheritance) at the time of the succession:
- If you are a tax resident in Spain, you must include in your ISD liquidation the totality of the inherited assets assigned to you (regardless of whether they are located in Spain or abroad), as you are taxed on a “personal liability” basis.
- If you are not a tax resident in Spain, you will only be taxed on the inheritance assets located in Spain that are assigned to you, i.e. you are taxed on a “real obligation” basis. In this case, the taxpayer should obtain a tax residence certificate from the country where he/she reside, to prove that he/she is not resident in Spain. In addition, he/she must appoint a tax resident representative in Spain to be able to file the ISD (using a simple authorisation available on the Hacienda’s website).
It should be noted that taxpayers under the Beckham Regime are considered tax residents for all purposes about ISD, unlike other taxes such as personal income tax or IP, where the non-resident rules apply to them.
Another relevant point is that of administrative competence, i.e. to which administration the ISD should be submitted:
- It must be filed with the regional tax administration of the deceased’s residence only if both the deceased and the beneficiary were tax residents in Spain.
- Otherwise (if the testator or both were not tax residents in Spain), the filing must be made with the State Tax Administration (AEAT).
With regard to the applicable regulations, the fact of filing the ISD with a regional or state administration does not automatically determine which of the regulations (regional or state) should be applied. Thus:
- If both the testator and the beneficiary are tax residents in Spain, the autonomous community regulations of the community where the testator resided will apply.
- If the deceased was resident in Spain but the beneficiary was not, the State or Autonomous Community legislation (whichever is more favourable) corresponding to the Autonomous Community where the deceased was resident may be applied.
- If the deceased was not a tax resident in Spain, the State or Autonomous Community legislation (whichever is more favourable) of the Community where the majority of the assets located in Spain are located may be applied.
| Cause | Causee (Taxable person) | Competition | Applicable regulations |
|---|---|---|---|
| Resident | Resident | CA causal residence | CA causal residence |
| No resident | State-owned | Option: (a) State (b) CA causal residence | |
| No resident | Resident | State-owned | Option: a) State b) CA with the highest value of assets located in Spain; if no assets, CA in which the CA resides |
| No residente | State-owned | Option: (a) State (b) CA with the highest value of assets located in Spain |
Until a few years ago, non-residents could not apply the regional regulations, but the Courts ruled that this limitation was an unjustified discrimination, so that they can now also benefit from the regional regulations.
This point is particularly important, as there are significant differences between regulations, especially in terms of reductions, tax allowances and multiplier coefficients, both between the different Autonomous Communities and in comparison with State regulations (which are usually more burdensome as they set a common minimum for the whole of Spain).
Finally, another key aspect in inheritance with international elements is the statute of limitations. Be careful if you have to file the ISD (either by personal or real obligation) of an inheritance formalised before a notary abroad: the deadline for the Administration to review or regularise the liquidation is not 4 years and 6 months from the date of death, but 4 years from the date the inheritance document is filed with any Spanish Administration. This can considerably lengthen the limitation period.
These are the most relevant aspects in an inheritance with international elements, although there may be others that also need to be considered. If you need to discuss your case, do not hesitate to contact me and we will talk about it.