The increasing international mobility of Spanish families and the arrival of foreign citizens to our country have turned cross-border inheritances into an increasingly common reality. When a person with international links dies, whether due to their residence, nationality or the location of their assets, a complex legal framework emerges that requires expert navigation between different legal and fiscal systems.
Fundamental Regulatory Framework: European Regulation 650/2012
Regulation (EU) No. 650/2012 of the European Parliament and of the Council, effective since August 17, 2015, constitutes the cornerstone of European succession law. This regulatory instrument, known as the European Succession Regulation, establishes a unified framework for successions with cross-border elements within the scope of the European Union, with the exception of Denmark, Ireland and the United Kingdom.
Scope of Application of the Regulation
The Regulation applies to the successions of persons deceased from August 17, 2015, establishing uniform rules on international judicial competence, applicable law, recognition and enforcement of decisions, and acceptance and enforcement of public documents in succession matters. Its main objective is to facilitate the management of cross-border inheritances through the elimination of obstacles to the free movement of persons and the simplification of succession procedures.
Determination of Applicable Law: The Principle of Habitual Residence
General Rule: Lex Ultimae Domicilii
Article 21.1 of the Regulation establishes as a general rule that the law applicable to the succession as a whole shall be that of the State in which the deceased had his habitual residence at the time of death. This criterion represents a fundamental change from the previous Spanish system, which was based on the nationality of the deceased.
Habitual residence is determined by considering the set of factual circumstances that characterize the deceased’s life during the years preceding his death and at the time thereof, taking into account especially the duration and regularity of the deceased’s presence in the State concerned, as well as the conditions and reasons for such presence.
Professio Iuris: Choice of Applicable Law
One of the most significant innovations of the Regulation is the introduction of professio iuris or choice of law by the deceased. Article 22 allows a person to choose as the governing law of his succession the law of the State whose nationality he possesses at the time of making the choice or at the time of death.
This choice must be made expressly through a declaration that takes the form of a mortis causa disposition, or result from the terms of such disposition. Professio iuris provides legal certainty and predictability in succession planning, especially relevant for persons with complex estates distributed in several countries.
Particular Cases and Escape Clause
Article 21.2 establishes an escape clause for exceptional situations where, given the totality of circumstances of the case, it is evident that the deceased maintained manifestly closer connections with a State other than that of his habitual residence. In such cases, the law of that other State shall be applicable.
European Certificate of Succession: Instrument of Unification
Nature and Function of the Certificate
The European Certificate of Succession (CSE), regulated in articles 62 to 73 of the Regulation, constitutes a uniform public document intended to be used by heirs, legatees, executors of wills and administrators of the inheritance who need to invoke their capacity and exercise their rights or obligations in another Member State.
This certificate does not replace the internal documents of each Member State, but is presented as an additional alternative for successions with cross-border elements. Its main advantage lies in the fact that it produces effects in all Member States without the need for any special recognition procedure.
Application and Issuance
The application for the CSE must be submitted to the competent authority of the Member State whose law is applicable to the succession or, when a law of a third State is applicable, to the authority of the Member State in which the inheritance assets are located. In Spain, the competent authorities are the notaries, in accordance with Royal Decree 1264/2015.
The certificate has a limited validity of six months from its issuance, extendable for equal periods at the request of any person entitled to request it. During this period, it is presumed that the person indicated in the certificate holds the qualities and powers mentioned therein.
Spanish Tax System in International Inheritances
General Principles: Personal Obligation vs. Real Obligation
The Spanish tax system clearly distinguishes between two types of obligations in the Impuesto sobre Sucesiones y Donaciones (ISD – Inheritance and Gift Tax), regulated by Law 29/1987. This distinction is fundamental to determine the scope of taxation in international cases.
The personal obligation, established in article 6 of the Law, applies to taxpayers who have their habitual residence in Spain, who must pay tax on all assets and rights that constitute the taxable patrimonial increase, regardless of their geographical location. By contrast, the real obligation of article 7 affects non-residents, who only pay tax on assets located in Spanish territory.
Distribution of Competences: State vs. Autonomous Communities
The management of ISD presents a complex structure derived from the transfer to the Autonomous Communities. The competence delimitation framework establishes precise criteria according to the residence of the deceased and the beneficiary:
When the deceased is resident in Spain, competence corresponds to the Autonomous Community of his residence, applying the corresponding autonomous regulations. If the deceased is non-resident, competence is always state-level, applying the regulations of Law 29/1987, although there is the possibility of opting for autonomous benefits in certain cases.
Detailed Analysis by Cases
Case 1: Non-Resident Deceased and Non-Resident Heir
In this situation, Spain can only tax assets located in Spanish territory by the principle of territoriality of the real obligation. The non-resident heir pays tax exclusively on these assets before the State Tax Administration Agency, applying state regulations or the regulations of the autonomous community where the greatest value of the assets is located.
Practical example: A German citizen resident in Berlin dies leaving an apartment in Marbella to his son, also resident in Germany. The son must pay tax in Spain only on the value of the Malaga property, filing the declaration before the state Treasury.
Case 2: Non-Resident Deceased and Resident Heir
This case generates the personal obligation of the resident heir, who must pay tax on all inherited assets worldwide. The competence would be autonomous: the tax would have to be filed in the community where the greatest value of assets is located or, failing that, in the community of residence of the heir.
Practical example: A Swiss businessman resident in Geneva dies leaving assets in Switzerland and Spain to his daughter resident in Madrid. The heir must declare in Spain both the Swiss and Spanish assets, being able to apply deductions for international double taxation as well as the regulations of the Autonomous Community of Madrid.
Case 3: Resident Deceased and Non-Resident Heir
The non-resident heir pays tax by real obligation only on assets located in Spain. The competence would correspond to the Autonomous Community where the deceased resided.
Practical example: A Spanish retiree resident in Valencia dies leaving his estate to a nephew resident in London. The British heir will only pay tax on assets located in Spain, before the autonomous Tax Agency.
Case 4: Resident Deceased and Resident Heir
This purely domestic situation determines full autonomous competence. The heir pays tax on all worldwide assets before the Autonomous Community where the deceased resided, applying the corresponding autonomous regulations with their specific reductions and bonuses.
Practical example: A Catalan doctor resident in Barcelona dies leaving assets in Catalonia and France to his wife, also resident in Barcelona. The taxation will be carried out before the Generalitat of Catalonia for all assets, applying the Catalan ISD regulations.
Relevant Jurisprudence and Regulatory Evolution
Supreme Court Doctrine
The Supreme Court Judgment of January 12, 2015, marked a milestone in the application of renvoi in international succession matters. The High Court established that renvoi serves to correct and modulate article 9.8 of the Civil Code when the international legal situation presents closer links with Spain than with the country of nationality of the deceased.
Subsequently, the Supreme Court Judgment of January 15, 2019, addressed the succession of an English citizen resident in Spain who granted a will in accordance with his personal law. The Court applied renvoi to the Spanish legal system, highlighting that the deceased could not choose the applicable law under the regulations prior to the European Regulation.
Impact of CJEU Jurisprudence
The Court of Justice of the European Union Judgment of September 3, 2014 (Case C-127/12) condemned Spain for tax discrimination in ISD regarding non-residents. This resolution forced the modification of the second additional provision of Law 29/1987, allowing residents in other EU Member States to access autonomous tax benefits.
The Spanish Supreme Court, in its Judgment of February 19, 2018, extended these benefits to non-resident taxpayers from third countries, applying the non-discrimination principles of Community law.
Complex Practical Cases
Multiple Nationality Case
María, a Spanish-French citizen, has resided in Paris for 15 years but maintains a family home in Seville and bank accounts in both countries. In her French will, she expressly chooses the application of Spanish law to her succession (professio iuris). Upon her death, her heirs (residents in Spain) must manage an inheritance governed by Spanish law but with assets in France.
The application of Regulation 650/2012 allows Spanish courts to have international competence, applying the Spanish law chosen by the deceased. However, taxation in Spain will follow the ISD rules according to the residence of the heirs.
International Family Business
José, a Spanish businessman, develops his activity in Spain but has been a tax resident in Andorra for 8 years. He owns shares in Spanish and Andorran companies. In his Andorran will, he does not make a choice of applicable law, so Andorran law will be applicable as the law of his habitual residence.
His children, residents in Spain, will inherit according to Andorran law, but will pay tax in Spain by personal obligation on all assets, potentially creating double taxation problems that will require the application of international agreements.
International Succession Planning
Tax Optimization Strategies
International succession planning requires a comprehensive analysis that considers both legal and tax aspects. The main strategies include:
Thoughtful choice of applicable law through professio iuris, considering differences in matters of forced heirship, freedom of testation and community property regime. Patrimonial structuring prior to death to optimize the location of assets according to the most favorable tax regimes. Use of corporate vehicles in jurisdictions with favorable double taxation agreements.
Documentation and Formalities
Effective management of international inheritances requires meticulous documentation. Essential elements include:
Multiple wills that meet the formal requirements of each jurisdiction where assets exist, avoiding unwanted revocations. Notarial powers that allow the action of representatives in different countries during succession processing. Certifications and translations of documents in accordance with international agreements (Hague Apostille).
Double Taxation Agreements in Succession Matters
Limited Conventional Framework
Spain has subscribed specific agreements to avoid double taxation in succession matters only with France, Greece and Sweden. This limited conventional network contrasts with the broad coverage existing in income taxation matters, generating frequent cases of unrelieved double taxation.
The Agreement with France, the most used in practice, establishes that real estate assets are taxed in the State where they are located, while movable assets are taxed in the State of residence of the deceased at death. This distribution can generate fragmentation of the hereditary mass for tax purposes.
Application of the Most Favored Nation Clause
In the absence of specific agreements, Spanish courts have exceptionally applied the most favored nation clause contained in double taxation agreements on income to extend benefits to succession matters. This practice, although controversial, has found support in certain administrative resolutions.
Conclusions
International inheritances represent one of the most complex areas of contemporary private law, where diverse legal systems and frequently incompatible tax systems converge. European Regulation 650/2012 has represented a significant advance in the harmonization of succession law, but important challenges remain, especially in the tax field.
Professio iuris emerges as a fundamental tool for international succession planning, allowing deceased persons to choose the applicable law most favorable to their family and patrimonial interests. However, this choice must be made with full knowledge of its tax implications in all relevant jurisdictions.
The Spanish tax system, with its distinction between personal and real obligation, offers a relatively clear framework for the taxation of international inheritances, although the interaction between state and autonomous competences can generate additional complexities. Recent CJEU jurisprudence has contributed to reducing tax discrimination, but areas for improvement persist.
Successful international succession planning requires a holistic approach that considers not only legal and tax aspects, but also the specific family, business and patrimonial circumstances of each case. In this context, specialized advice and international coordination between professionals are essential elements to guarantee effective management of these complex situations.
Frequently Asked Questions
1. Can I choose the law that applies to my inheritance if I reside in another EU country?
Yes, through professio iuris you can expressly choose in your will that the law of your nationality be applied instead of the law of the country where you habitually reside. This choice must be made clearly and expressly in a testamentary disposition.
2. Where should I pay Inheritance Tax if I inherit assets from a foreign relative?
If you are resident in Spain, you must pay tax to the state Tax Agency applying the autonomous regulations of your residence for all inherited assets, wherever they may be located. If you are non-resident, you only pay tax on assets located in Spain.
3. What advantages does the European Certificate of Succession have over other documents?
The European Certificate of Succession is automatically valid in all EU countries without the need for special recognition or apostille. It greatly facilitates the management of inheritances with assets in several European countries, although it does not replace the internal documents of each country.
4. Can I avoid double taxation in international inheritances?
Spain has agreements to avoid succession double taxation with France, Greece and Sweden. For other countries, you can apply deductions for taxes paid abroad according to article 23 of the ISD Law, although with limitations.
5. Is it mandatory to make a will if I have assets in several countries?
It is not mandatory, but it is highly recommended. A well-planned will with choice of applicable law (professio iuris) can greatly simplify inheritance processing and optimize the tax burden. Consider making specific wills for each country where you have significant assets.