EU rules against Spain on ‘discriminatory’ inheritance tax

(Reuters) – The European Court of Justice ruled against Spain on Wednesday in a case that could reduce the amount of inheritance tax the country can charge foreigners living in Spain, currently higher than that charged Spaniards.

More than 12 percent of Spain’s total population were born elsewhere, one of the highest percentage of foreign residents in European Union countries, with most from Romania, Morocco and Britain.

The court said Spanish legislation was discriminatory and there was no reason why inheritance tax should be charged at a higher rate for non-Spaniards than for Spaniards.

The European Commission referred the case to the court in 2012 after considering that the legislation was incompatible with free circulation of people and money within the EU.

The law applies different rates of taxation to inheritances or gifts of property in Spain depending on whether the recipient is Spanish.

While national legislation makes no specific distinction based on residency, inheritance tax rates for Spanish residents are regulated at a regional level.

For all non-Spanish residents, the national tax rate applies, often at a much higher rate than a Spaniard living in the same region.

The government is looking at how to bring Spanish legislation in line with the ruling, a source at the Treasury Ministry, which handles taxation, said.

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(Reporting by Tomas Cobos; Writing by Sonya Dowsett; Editing by Paul Day and Alison Williams)

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