Tax break for foreigners in Spain?

SPAIN’S current tax system goes against EU agreements, and tax rates applied to foreign nationals should be lowered, the Union’s top court in Luxembourg has ruled.

Wednesday saw the European Court of Justice order the Spanish government to change inheritance tax laws which disproportionately favour Spanish citizens over non-residents.

At the moment, if either the deceased or the recipient of the inheritance is a non-resident, the tax rate imposed is significantly higher than in cases when all parties are Spanish, meaning that expats and their families are currently losing out when the tax man comes calling.

The EU has ruled that the system is in breach of its laws, and should be modified at the earliest possible opportunity.

It is unclear as to when Spain will begin the process of changing its legislation, as a government representative has yet to comment on the ruling.

The European Commission first asked the Spanish government to get in line with EU treaties regarding inheritance and donation tax back in 2010, but the case was brought to Europe’s highest court after Spain’s continued failure to comply.

Spain’s tax system is a complicated one, a fact which may have helped to contribute to the current situation.

The individual autonomous regions manage and collect their own taxes, and in many cases implement mechanisms to reduce taxes locally. It is hoped that changes to the legislation will contribute to a European-wide level playing field when it comes to tax laws.