Spain maintains the one with the greatest pressure, which reaches a maximum rate of 81.6%. Of the surrounding countries, only Belgium comes close, which has a maximum rate of 80% for inheritances between non-relatives. On the European continent, up to 18 countries do not have Inheritance Tax in their fiscal policy.
for successions or donations of more than 797,555.08 euros, according to the latest EY international report on these taxes, the Worldwide Estate and Inheritance Tax Guide 2021. However, the resulting gross tax must be further increased by applying certain coefficients additional.
These additions account for, among other things, the net worth of the acquirer before the acquisition or the relationship with the donor or the deceased. This causes the maximum effective rate to reach 81.60%. That is, the maximum general rate -34%- multiplied by the maximum personal rate -of 2.4- which gives this result of 81.60%.
“I always say that, in any inheritance, the Treasury is one more heir, a forced heir, a kind of heir. And if it is not about inheritances between direct relatives, the Treasury can be the main heir, the one that takes the most”, points out the tax lawyer Alejandro del Campo, partner of DMS Legal Intelligence. “And they are very demanding heirs, who want their share within 6 months,” adds the lawyer. “In any case, as they are heirs who do not usually like each other very well, it is possible to plan in life to reduce their legitimate, so that it is as little as possible, within the strictest legality,” he adds.
Is it confiscatory?
Alejandro del Campo recalls a recent Judgment of the Superior Court of Justice of the Balearic Islands, of October 14, 2020. The affected party initiated a judicial process for an inheritance. The heir had had to pay 824,041 euros on an inheritance of 1,425,323 euros, almost 60%. He considered that such quota was unconstitutional, for “confiscatory and contrary to the principle of economic capacity.” However, the Court did not accept his argument. “He comes to tell him that it is one thing for the tax to be high or large and another for it to be confiscatory, that although he has been forced to sell part of what he inherited and ask for installments, with interest, he has something left and that his assets will not be has been compromised,” says del Campo.
For his part, Esaú Alarcón, a partner at Gibernau Asesores, considers that “the problem in the ISD is the lack of harmonization between the autonomous communities, having granted them poorly planned regulatory capacities.” In his opinion, “if taxation were harmonized at reasonable tax rates, things would work much better.” Alarcón stresses that, despite these cases in which the rates reach these figures, “the Gift and Inheritance Tax should not disappear, nor is it high in most cases.”
The prosecutor explains that “in the 90s, the famous capital gains of the deceased disappeared from personal income tax, that is, the capital gain derived from the death of a person is not taxed.” Alarcón believes that if this exemption were eliminated, making the capital gains of the deceased taxed in personal income tax and thus replacing the ISD, as is the case in other countries, the tax would then be between 19% and 26%. “I don’t have statistics, but I’m afraid that taxation would be much higher than that of common inheritances today,” he concludes.
ISD in Europe
The ISD comes from Roman law. The Empire collected 5% of inherited property to pay soldiers’ pensions. Most of the European countries included in the current map charge inheritance or gift taxes. These countries are Belgium, Bulgaria, Croatia, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Lithuania, Luxembourg, the Netherlands, Poland, Portugal, Slovenia, Spain, Switzerland, Turkey, and United Kingdom.
“Countries typically charge only estate or inheritance taxes,” explains Elke Asen, a policy analyst at the Tax Foundation’s Center for Global Tax Policy. “However, inheritances can be taxed twice if they are under two jurisdictions that apply different taxes. For this reason, the member states of the European Union have installed mechanisms aimed at preventing or alleviating double taxation in the event that such a situation occurs. “, Add.
In several countries, such as in Spain, the tax rates vary according to the region
The tax rates applied to estates, inheritances, and gifts often depend on the level of family closeness to the heir, as well as the amount to be inherited. For example, France applies different rates to transfers to ascendants and descendants, transfers between siblings, blood relatives up to the fourth degree, and all others. For transfers to ascendants and descendants, as well as between siblings, higher rates apply to larger sums of money.
In some countries, such as Belgium or Switzerland, estate, gift and inheritance tax rates also vary by region. Most European countries do not tax transfers below a certain amount.
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