Can Non-Residents Benefit From Regional ISD Reductions In Spain?

Spanish Inheritance and Gift Tax (ISD) is heavily influenced by regional tax benefits, but for years those benefits were largely denied to non-residents. In this episode, we explain when and why non-residents can now access regional ISD reductions—and where the limits remain.

🔎 What You’ll Learn in This Episode:

1️⃣ The EU Law Turning Point

Non-residents may benefit from regional ISD reductions where there is a sufficient EU or EEA connection.

This principle arises from a landmark decision of the Court of Justice of the European Union in Case C-127/12, European Commission v Spain.

The Court held that Spain’s practice of denying regional inheritance and gift tax benefits to EU and EEA non-residents breached EU law, particularly the free movement of capital.

2️⃣ What Changed After the Judgment

As a result of the ruling:

• Spain was required to extend regional ISD reductions and allowances to EU and EEA non-residents

• Non-resident recipients can, in certain circumstances, be taxed under regional rules rather than the less favourable state-level regime

This applies to both inheritances and gifts.

3️⃣ Who Can Benefit

Non-residents may access regional benefits where:

• There is a qualifying EU or EEA connection

• The relevant Spanish region can be identified under the applicable connecting factors

• Procedural and documentation requirements are met

This can significantly reduce the effective tax burden compared to the default non-resident rules.

4️⃣ Important Practical Limits

• The benefit does not automatically apply to all non-residents

• It generally does not extend to non-EU/EEA residents

• Correct structuring, filing, and evidence are critical to claiming regional relief

5️⃣ Key Takeaway

While Spanish ISD is formally a national tax, EU law has reshaped its application.

For EU and EEA non-residents, regional tax benefits are no longer out of reach—but they must be actively claimed and carefully supported.

This episode explains how EU law continues to influence Spanish inheritance and gift taxation—and why non-residents should not assume the worst-case tax position without proper analysis.