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Life Events in Spain

Spanish Inheritance Tax. Important judgment of the European Court of Justicie
2.Jan.15 - 9.00pm

The European Court of Justicie (ECJ) has ruled that the Spanish Tax Authority┬┤s succession tax sistem conflicts with the European Union principles of freedom of movements of EU individuals and circulation of money within the EU.

On the 3rd of September 2014, the ECJ (Case C-127/12) made a judgment resolving that the Spanish Inheritance Tax imposes restrictions on the free movements of capital, more precisely, violates the article 63 of the Treaty on the Functioning of the European Union and article 40 of the Agreement on the European Economic Area.

According to Spanish law, non residents in Spain are not entitled to apply for advantage of certain tax allowances set-forth by the different Spanish Autonomomus Regions as opposed to Spanish tax residents. Such distinction becomes in practice a much lower effective tax for residents in such Autonomomus Regions rather than for others EU residents.

This Case was originated in July 2007 when the European Commmission formaly requested Spain to take actions to archieve the compilance of EU rules in regard to inheritance and gift tax rules, in particular, those related to non-residents.

From a practical point of view, and as result of the above facts, non-Spanish residents taxpayers, particulary EU residents who have been subject to the inheritance tax in Spain, have now the oportunity to analyze the possibility of claming a refund from the tax authorities for the amounts (potentially) unduly paid. Several proceedings may be applicable and case-by-case analysis is required, but amounts at stake may be relevant and may potentially incluse delay interest

Taxation of non Residents
09.Oct.08 - 12:30pm
While residents in Spain pay taxes on their income worlwide, non residents are taxed on their income sources within Spain. That is why residency is so important.
lIndividual are deemed to be residents in Spain when they meet any of the following criteria:

They remain in Spain for more than 183 days during a calendar year. In order to determine the period of stay, sporadic absences are included in the count, except those where the tax residence in another country is proved. In the case of countries or territories labeled as tax havens, the Tax administration can demand proof of stay in that tax haven over a period of 183 days in a calendar year.

Their main base or centre of activities or economic interest is, directly or indirectly, in Spain.

Also, it is presumed, except if proved otherwise, that taxpayer has his usual place of residence inSpain when, using the above criteria, his spouse - not legally separated- and underage dependent children are permanent residents in Spain.
An individual will be considered either as resident or non resident for the whole calendar year, because a change of residency does not interrupt the taxable period.

Acreditation of fiscal residence
Tax residence is proved by a certificate issued by the competent Tax Authority of the country concerned. the period of validity of these certificates is one year.
A person may have a residence permit or administrative residence in a State and not be considered resident therein for tax purposes.

Income obtained in Spain - Exemptions
Non Resident individuals and organization shall be deemed non resident taxpayers insofar as they obtain income in Spain.
The two traditional criteria to consider certain income as obtained is Spain are territoriality and source of payment. However, in accordance with the regulations in force since 1 january 2003, the criterion will only be applicable when it is expressly established. Below are the criteria to determine when income is deemed to have been obtained in Spain, based on the tipe of income.
Earnings derived from economic activities
Wages and Salaries
Pensions and other similar benefits
remuneration of directors and members of Boards of Directors
Income from financial assets and other movable capital
Earnings from real estate property
Capital gains
EXCEMPTIONS
Scholarships and grants
Pensions
Lottery winnings, bettings and draws

Fiscal Ammesty - Royal Decree-Law 12/2012 - Model 750
20.Sep.12 - 07.00pm

1.- The order issued on 4th June 2012 in the Official Gazette accommodate this amnesty to taxpayers of the income tax, corporation tax or non residents which hold goods and undeclared rights to the Spanish Tax Office.

2.-The assets and rights that arise with this tax amnesty can be cash amounts, property assets and rights pertaining to economic activities, deposits in bank account, values representatives of the assignment to third parties of own capital, values representative participation in equity in a company, or any other type of property and rights that were not declared in previous statements of income tax or on the income tax of non residents.

3.- The valuation of the assets and rights is performed by its acquisition value. And on the total of the recognized amount 10% tax will be applied. The result of the application of this percentage will be the fee to enter. If the undeclared amount corresponds to cash, just that the taxpayer demostrate the possession before 31st December 2010 and deposit the corresponding amount in an account of Spain, the European Union, or any other country of the European economic area with which there is a Convention to avoid double international taxation.

4.- The Goverment has desisgned the model 750 specifically for this statement. This document may submit by internet. By attached form the model 750 will collect extended information of the declared goods.

5.-The special tax return may only be made until November 30th of this year.

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Information on Inheritance Tax for non residents
Taxpayers
All heirs, legatees and beneficiaries who do not have their usual residence in Spain are liable to this tax, residents in Spain are also liable for this tax when the person making the bequest (deceased person) did have their habitual residence in Spain. Usual residence is determined in accordance with the Income Tax Regulations (Legislative Royal Decree 3/2004).

FAQ
Under the Double Taxation Agreements signed by spain, where is income derived from real estate asset taxed?

All the Double Taxation Agreements signed by Spain follow the criteria established by the OECD Model Agreement in that they attribute the right to tax income derived from the real estate assests to the State where such assets are located. This criteria is applied whatever the income obtained from real estate, rental, use of housing, etc.

For assets acquired before 09.06.96 and transferred from 01.01.97, what is the length of time that the asset must be held in the estate of the individual taxpayer so that the capial gain is not subject to tax?

Previosly, the length of time for holding an assets is calculated based on the number of years between the asset acquisition date and 31.12.96, rounded upwards. Consequently, in order for the capital gain not to be subject to tax, the aforementioned period must be:
More than 5 years for officially quoted shares, excluding those of Real Estate Investiment Organisations.
More than 10 years for buildings or the rights to enjoy them.
More than 8 years for other assets (for example, shares in investiment funds).