Newsletter May 2013

Inheritance Tax in Catalonia

First of all I would like to clarify some concepts that I think are important. Inheritance & Donations Tax is a Regional Tax, in our case Generalitat de Catalunya, although National Government set the main principles.In the transaction "mortis causa" there two main parties, the deceased and the heir/heirs.

It has to be noted that in other countries the criteria to declare Inheritance Tax is nationality and not residence, so it may be a case of double tax obligations that can complicate the tax scenario.

The first thing to consider is the residence of the deceased, whether it is in Spain and in which Region they have resided longer in the past five years.The person or persons required to declare the inheritance tax are the heir/heirs so their tax status is very important and crucial in the process.

If the heir is resident in Spain all property and rights acquired will be taxable regardless of where they are located and/or where the entity that pays is located (in case of life insurance). The competent authority in this case is the Generalitat de Catalunya if the heir resides in Catalunya.

If the heir is NOT resident in Spain the assets and rights located in Spain will be taxable in Spain, at the national level.

In this case, the competent authority is the National Government, not the Regional.This point is very important because reductions and exemptionsin inheritance with first grade have considerable reductionsin Catalonia (can reach 99%) but lower than a National level.The residence of the heir and the relationshipbetween the deceased and heir is very importantin which fiscal strategy to implement.

Girona: Creu nº2 bis Of 7 Phone: +34 972-109-613Calonge: Major nº12 Fax: +34 972-105-750Empuriabrava: Joan Carles I, nº 165 email: girona@ceconsulting.es

If you are a tax resident in Spain you must submit your Income Tax Return prior to the 26th June 2013 if you have to pay and if Hacienda has to return due by 1st July 2013.

In the case of a Dutch woman living in Catalunya receiving inheritance from her deceased husband (also resident in Catalonia), all goods received regardless of location will be taxable in Catalunya.

In this case the competent authority would be the Generalitat de Catalunya and apply the general max reduction to 99% of the acquisition value base.

Five years later the Dutch woman dies and her children are living in the Netherlands They receive the inheritance after her decease. In this case, National law will apply (not Generalitat) and only the assets and rights located in Spain.Is it necessary and obligatory to have a will in Spain? It is not mandatory but highly recommended for the assets and rights located in Spain and you do not have a will in your country of origin. In any case this will have to be in line with the wills of the country of residence. Facilitates the entire process.The necessary documentation before declaring Inheritance tax is:a) Death certificate of the deceasedb) Certificate of willsIn the absence of a will, you have to make the declaration of heirs:1. If the heirs are children, parents or spouse, by a Spanish Notary2. If the heirs are other people they will have to start a court procedure.

The maximum time to submit the liquidation of the Inheritance Tax is six months after the death but you can request an extension of another six months.

Girona: Creu nº2 bis Of 7 Phone: +34 972-109-613Calonge: Major nº12 Fax: +34 972-105-750Empuriabrava: Joan Carles I, nº 165 email: girona@ceconsulting.es

Newsletter April 2013