The inheritance tax. Term, Self-liquidation, Place of Payment
The time to pay the Inheritance Tax is six months from the death, but the heir may apply for an extension of another six months, within five months of the death.
The extension granted will start counting from the end of the initial six-month period and will entail the obligation to pay the legal interest rate until the day the tax is filed. The Request must be filed with the death certificate of the deceased and must contain the name and address of the heirs, their relationship to the deceased, identification and estimate of the value of goods and rights, and, finally, a reason for the extension.
In most regions – for example, Valencia, Balearic Islands, Catalonia, and Andalusia – the payment of this tax must be made compulsorily through the system of self-liquidation, so that the heir must calculate how much has to be paid tax and pay it to Finance Office, using the corresponding official form (-mod. 650 and 660-) and complete the payment at any Bank that has the status of partner of the tax office.
Where to pay the inheritance tax.
It is critical to pay the tax to the right Region because if it is paid in a wrong one (although it can be requested to be returned), the first has the right to claim the payment of the tax.
The tax is paid in the Region where the deceased had his habitual residence, regardless of the place where the inherited assets are.
In order to conclude the habitual residence of the resident within national territory of Spain, the principle is that the deceased had his habitual residence in the Region where he has lived more days in the last five years before the death (except in the Basque Country and Navarre, where it is considered only the year immediately preceding the death.
Heir or deceased residing abroad.
However, in the case of residence outside Spain, the following must be taken into account:
• The heir or legatee residing abroad must pay the inheritance tax to the Spanish State and not to the Region, being applicable central state legislation. This was important (until the judgment of 3 September 2014 issued by the Court of Justice of the European Union) as the state law does not foresee many reductions that do apply in the regulations of the Autonomous Communities.
• Although the heir or legatee lives in Spain, if the deceased resided outside Spain, the heir had to pay the Inheritance Tax also to Spanish central administration, and according to the state legislation.
Non-Resident discrimination. Condemns to the Spanish Kingdom.
The sentence of 3 September 2014 issued by the Court of Justice of the European Union condemned the Kingdom of Spain for failing to comply with European legislation.
This judgment stated that the Kingdom of Spain discriminated against non-residents by establishing Differences in the tax treatment of donations and successions between:
– The heirs and donees residents and nonresidents in Spain,
– deceased residents and deceased non-residents in Spain,
– and between donations of real estate situated in and outside Spain.
This discrimination breach the obligations imposed on each Member State by Articles 63 TFEU and 40 of the Agreement on the European Economic Area of 2 May 1992.
That Sentence decided that in the event that the right to charge this tax corresponds to the central administration of Spain, the bonuses provided in the regional legislation apply.
That obliges Spain to refund part of the amount paid by non-residents for the Inheritance and Donation Tax.
In other words, since that ruling, if an heir resides outside Spain, he is entitled to the tax benefits established by each Spanish Region, although the payment of the tax corresponds to the central State. That is of particular importance if the heir belongs to groups I and II of kinship (children, spouse or partner in fact and ascendants).
The current criteria to determine the applicable rules in matters of inheritance tax are:
A) If the deceased resided outside Spain, in a Member State of the European Union or of the European Economic Area, it differs:
– If the assets of the inheritance are in Spain, the own regulations approved by the Region will be applied where the majority of them are found.
– If the assets are outside Spain, the tax regulations of the Region in which he resided will be applied to each heir.
B) If the deceased was resident in Spain, a non-resident beneficiary (who live in a Member State of the European Union or the European Economic Area) should have the right benefit of the bonuses approved by the Region where the deceased lived.
That judgment has retroactive effect. It can be claimed what was unduly paid if have not passed the statute of limitations of four years from the wrong payment.