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The amendment of this tax originates from a judgment handed down by the Court of Justice of the European Union on September 3, 2014 (case C-127/12) which determined that Spain had breached EU law by allowing differences in the tax treatment of gifts and inheritances according to whether (i) the successors and recipients are Spanish resident or not, (ii) the decedents were Spanish resident or not and (iii) the gifts and similar disposals of real estate were located in Spain or not.

The Inheritance and Gift Tax Law is therefore amended to introduce a number of rules that eliminate the cases of discrimination found by the court, thereby placing the tax treatment of residents and nonresidents on an equal footing.

The new connecting factors with the autonomous community legislation are as follows:

(i) Where the decedent has been resident in a member state of the EU or of the European Economic Area, other than Spain, taxpayers will be entitled to apply the specific legislation approved by the autonomous community in which the assets and rights with highest value are located among the assets and rights in the estate located in Spain. If there are no assets or rights located in Spain, each taxable person will be subject to the legislation of the autonomous community where he resides.

(ii) Where the decedent was resident in an autonomous community and the taxpayers are not resident there but reside in a member state of the EU or of the European Economic Area, the taxpayers will be entitled to apply the specific legislation approved by that autonomous community.

(iii) Where real estate located in Spain is acquired by gift or in any other legal transaction for no consideration and inter vivos, nonresident taxpayers who are resident in a member state of the EU or of the European Economic Area will be entitled to apply the specific legislation approved by the autonomous community where that real estate is located.

(iv) Where real estate located in a member state of the EU or the European Economic Area, other than Spain, is acquired by gift or in any other legal transaction for no consideration and inter vivos, taxpayers resident in Spain will be entitled to apply the specific legislation approved by the autonomous community where they reside. (v) Where movable property located in Spain is acquired by gift or in any other legal

transaction for no consideration and inter vivos, nonresident taxpayers who are resident in a member state of the EU or the European Economic Area will be entitled to apply the

specific legislation approved by the autonomous community where the movable property has been located for the greatest number of days within a period comprising the immediately preceding five years, reckoned from date to date, which ends on the day before the tax falls due.

For the purposes of the above rules, individuals resident in Spain will be deemed to be resident in an autonomous community where they have spent the greatest number of days in that autonomous community in the period comprising the immediately preceding five years, reckoned from date to date, which ends on the day before the tax falls due.

Where in a single document different assets or rights are given to the same recipient by one giver, and the above rules determine that the legislation of different autonomous communities applies, the tax payable will be determined as follows:

(i) The average tax rate must be calculated by applying to the value of all the given assets and rights the legislation of the central government and the legislation of each autonomous community where a part of those assets and rights is located.

(ii) Then by applying the average rate obtained under its own specific legislation to the value of the assets and rights that are located in each autonomous community, the tax payable will be determined in respect of those assets and rights.

Any taxpayers required to fulfil their inheritance and gift tax obligations with the central government tax authorities:

(i) must file a self-assessment, and perform the necessary transactions to determine the amount of the tax debt;

(ii) must attach the document or statement containing or evidencing the taxable event; (iii) must, when filing their self-assessment, pay over the resulting tax debt in the place,

manner and time periods determined by regulations.

3.

Wealth tax

With the same aim as in the case of inheritance and gift tax, the following wealth tax rule is introduced to allow similar treatment between residents and nonresidents who are resident in other member states of the EU or the European Economic Area.

Specifically, nonresident taxpayers who are resident in a member state of the EU or of the European Economic Area will be entitled to apply the specific legislation approved by the autonomous community where the value of the assets and rights that are owned by them and subject to wealth tax because they may be exercised or must be fulfilled in Spain, is highest.

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