Reclaim Overpaid Spanish Inheritance Tax After Brexit — Costa Blanca Guide

British nationals who inherited property in Torrevieja, Orihuela Costa or anywhere on the Costa Blanca between 2015–2020 may have overpaid inheritance tax by €15,000–€80,000. Learn who qualifies for a refund, the 4-year deadline, and how Bufete Padilla recovers overpaid ISD in Alicante province.

When a British national inherits property or assets in Spain, the tax bill can come as a shock. For years, non-EU residents were systematically charged higher inheritance tax than Spanish or EU citizens because they could not apply the regional tax reductions (*bonificaciones autonómicas*) available in communities like Valencia, Andalucía or Madrid.

That changed — partially — after a landmark ruling by the Court of Justice of the European Union (CJEU) in September 2014, and again after Brexit created a new legal grey area for UK citizens.

The Problem: Discriminatory Tax Treatment

Spanish inheritance and gift tax (*Impuesto sobre Sucesiones y Donaciones*, ISD) is regulated at two levels:

  • State level: sets the base rates and general rules
  • Autonomous community level: each region can introduce reductions, allowances and bonuses that dramatically lower the effective tax rate

For example, the Valencian Community offers a 75% reduction on inheritances between parents and children under certain conditions. The Madrid region has historically applied a 99% bonus. These benefits were originally reserved for residents of Spain or EU/EEA nationals.

Non-EU residents — including British nationals — were forced to apply the state-level rates, which are significantly higher. A British widow inheriting a €300,000 property in Torrevieja could easily pay €40,000–€60,000 more than a Spanish or German national in the same situation.

The 2014 CJEU Ruling

On 3 September 2014, the CJEU ruled in Case C-127/12 (*Commission v. Spain*) that Spain's inheritance tax regime was discriminatory because it denied the regional benefits to non-residents and to residents inheriting assets located in other EU member states.

As a result, Spain amended its ISD law through Disposición Adicional Segunda of the ISD Act, extending the right to apply the most favourable regional rules to:

  • EU and EEA nationals, regardless of residence
  • Non-residents inheriting Spanish assets, if they were EU/EEA citizens

This was a major win. However, non-EU nationals — including Americans, Canadians and, after 31 January 2020, British citizens — were still excluded.