A few months ago, we already explained in a post the tax changes that had been approved in Andalucía, under the Decree-Law 1/2019, of 9th April, which modifies the refunded text of the dictated provisions by the Andalusian Autonomous Community in matters of ceded taxes, approved by the Legislative Decree 1/2018 of 19th June.
This modification had specially relevance as far as the Inheritance and Donations Tax was concerned, when Andalusia approved a general bonus of 99% on the tax rate for taxpayers included in I and II group of kinship for all acquisitions “mortis causa” and “inter vivos” whatever the value or type of property were transferred.
However, there are many people, transmitters or beneficiaries of these operations, who are non-residents in Spain, and they consider how this regulatory change affects them in Andalucía.
What regional regulations are applicable to me?
First of all, it is necessary to clarify when the Andalusia regional regulations apply to me and when not.
The Law 22/2009, of 18th December, which regulates the financing system of Autonomous Communities with common regime and Cities with Statute of Autonomy and modifies certain tax rules, establishes which regional regulations is applicable in each case, depending on the tax involved and the type of element that is transmitted.
In the case of Inheritance and Donations Tax that concerns us, and according with the 32 article of the aforementioned law, the Andalusia regional regulations will apply:
- If the person had his/her habitual residence in Andalusia, in the case of mortis causa transmissions.
- In the case of real estate donations, if these ones are in the Community of Andalusia.
- And in the case of whatever other “asset” or “rights” donations, if the donor who is receiving the assets has his/her habitual resident in Andalusia.
But if the deceased or donor is non-resident in Spain?
In this case, as the deceased or donor are non-resident in Spain, in principle, the State regulation would be applicable and the tax must be paid directly to the State Tax Administration.
However, after several pronouncements of the Supreme Court, based on the Judgment of the Justice Court of the European Union dated 3rd September 2014, the state regulations of Inheritance and Donations Tax was modified to adapt it to European regulations, allowing European Union residents to choose whether to apply or not the regulations of a certain Autonomous Community based on a serie of criteria.
And, more recently, the Supreme Court in its judgment nº 242/2018, of 19th February 2018, has ruled that non-EU residents cannot be discriminated, so the General Directorate of Taxes (an Spanish administrative body), in recent Binding Consultations of 11th and 14th December 2018, has adopted this criterion allowing to apply the same criteria to those who are neither resident in Spain nor resident in a Member State of the European Union.
Through this, the Second Additional Provision of Law 29/1987, of 18th December, of the Inheritance and Donation Tax, approved for these purposes, would be applicable in relation to all non-residents, regardless of whether they reside in a EU Member State or in a third country.
The criteria for applying the State and/or Regional regulations could be summarized as follows:
In the case of donations
||Kind of goods/assets that is donated
|Resident||Resident||Property in Spain||Community where the property is located|
|Resident||Resident||Property outside of Spain||State regulations with the option to apply that of the donor´s community of residence|
|Resident||Resident||Another goods or assets in Spain||Community where the donor resides|
|Non Resident||Resident||Property in Spain||Community where the property is located|
|Non Resident||Resident||Property outside of Spain||State regulations with the option to apply that of the donor´s community of residence|
|Non Resident||Resident||Another goods or assets in Spain||Community where the donor resides|
|Resident||Non Resident||Property in Spain||State regulations with the option to apply that of the community where the property is located|
|Resident||Non Resident||Another goods or assets located outside of Spain||It is not subject to the Spanish Inherence and Donations Tax|
|Resident||Non Resident||Another goods or assets in Spain||State regulations with the option to apply that of the community where the property or right has been for a greater number of days in the last 5 years|
And, in the case of successions
||Successor or beneficiary (taxpayer)
|Resident||Resident||Resident community of the deceased|
|Resident||Non Resident in Spain||State regulations with the option to apply the community of residences of the deceased|
|Non Resident||Resident||State regulations with the option to apply that of the community in which the highest value of the assets located in Spain is located or, if there are no assets in the country, in which the taxpayer resides.|
|Non Resident||Non Resident||It would only be subject to the Spanish Inherence Tax if the assets that are inherited are located in Spain. It would apply state regulations with the option of regional regulations where the highest value of goods in Spain is found|
- So, if I am non-resident in Spain and I want to transmit some assets to my descendants who reside in Andalusia, can I benefit from 99% bonus provided by this Community?
In this case, as the donor is a tax resident in Spain and reside in the Andalusian Autonomous Community, the regional regulations would be applicable and therefore the aforementioned 99% kinship bonus could be applied.
- And, if I am not resident in Spain, but I am who received assets located in Spain from a family member of Group I and II resident in Andalusia, can I apply the bonus?
In this other case, the donor who receives the assets is not a tax resident in Spain. However, according to the Additional Provision, if they are not real states and they would have been in Andalusia most of the time in the last 5 years, the donor is entitled to choose to apply the Andalusian Autonomous regulations and therefore to benefit from the aforementioned 99% bonus.
In the same way, if the asset were a real state located in Andalusia, the taxpayer would also be entitled to choose to apply the regulations of this Community.
- Compatibility with reductions in state regulations.
Finally, it is necessary to remember that this automatic bonus for kinship does not prevent the taxpayer from applying, as well, the reductions established at the state level for cases in which an individual company, a professional business or company shares are transmitted by “mortis causa” or “inter viva”, as long as the requirements for applying the exemption regulated in article 4.8 of Law 19/1991, of 6th June, are met.
This reduction is especially interesting in the case of donations because, apart from greatly reducing the amount to be paid in respect of the Inheritance and Donations Tax, it implies no capital gain for the donor in his Personal Income Tax, regardless which is the donor tax residence; all in accordance with the provisions of article 33.3 of Law 35/2006, of 28th November, of the Individual Income Tax and with article 24.4 of the Royal Legislative Decree 5/2004 of 5th March, approving the consolidated text of the non-resident Income Tax Law.
In any case, we always recommend you to be advised by trusted professionals previously to applying any bonus or tax reduction, so that all the tax settlement is done in accordance with the regulations, ensuring that all the legal requirements are fulfilled and the tax amounts are correctly controlled.
 Group I: Descendants and adopters under 21.
Group II: Descendants and adopters from 21 to more years, spouses, ascendants and adopters.