Tribunal_ConstitucionalThe Spanish legislation on inheritance and gift tax continues to receive setbacks. It is the turn now for the Valencian regional legislation and in particular the Article 12 bis of the Law of Valencia 13/1997 which has been declared unconstitutional.

We are still far away from an ideal situation where Inheritance tax treatment is harmonized in all the Spanish regions and reduced to more affordable rates, at least in those cases levied on transfers within close family (parents, spouses and descendants), but from the last sentences at least we are leaving behind regulations that were clearly discriminatory.

After the sentence of the European Court of Justice of 3 September 2014, deeply studied in this blog, which forced the Spanish State to amend our tax legislation urgently in order to eliminate the discrimination between residents and non residents when applying the most favorable regional regulations, it is now the Constitutional Tribunal which, by means of a sentence dated 18 March 2015, declares unconstitutional the article of the Valencian legislation, which obliged the heirs to be resident in the autonomous region of Valencia to be eligible for the existing bonuses on the final tax bill.

The question of unconstitutionality was raised by the Supreme Court, as a result of the appeal presented by an heir to the dismissal of his appeal to the High Court of Justice of Valencia, which refused his right to enjoy the 99% bonus, now 75%, of the Inheritance Tax bill because he was non resident in Valencia. The estate in question was his late father´s and he opted for it together with his mother and sisters who were residents in this region. They all had the same degree of kinship with respect to the deceased (group II) and inherited with the same portion (€ 841,999.40). Whereas the tax bill for the resident heiresses was around € 2,000 only, the tax bill for the non-resident in Valencia amounted to € 202.210,86.

The Constitutional Court accepts the reasoning and arguments presented by the Supreme Court and considers that there is no supporting foundation in the regional legislation that can legitimize why the bonus should be applied differently in the case of siblings receiving the same inheritance.

With the Law 7/2014, effective from 1 January 2015, the Regional Government (Generalitat) had already abolished the requirement of habitual residence in Valencia for the implementation of reductions and regional bonuses to the acquisitions by inheritance or donation, but only in cases generated from that date.

Therefore, the heirs of group I and II (parents, children and spouse) that prior to 2015 have paid the Inheritance Tax can claim back the extra sums paid for not implementing the regional bonuses, providing that the right to appeal and seek reimbursement has not expired and in the following cases:

  • When the deceased had not been resident in Valencia, but in a member country of the EU or the EEA, as long as the sum of the assets located in the region of Valencia were those with the greater value out of all the assets located in the Spanish territory.
  • When the deceased had been resident in Valencia at his/her death and the inheritors were not resident in the Valencian region but in another area of Spanish or in a country within the EU or the EEA.
  • In the donations of real estate located in Valencia, when the donee was not resident in that community but in another community of Spain or in a member country of the EU or the EEA.

If you are in this situation, please contact us and we would be happy to help you to recover the amounts paid.

Luis M. Vicente Burgos
VICENTE & OTAOLAURRUCHI ABOGADOS