Ths Spanish government has recently revised the rules regarding inheritance tax for spouses and family members. In particular the family residence hsa maintained its exemption from tax up to 95% of its value. However the maximum value of this ecemption has been incresaed to 500,000€. It is now more important than ever to determine which residence is the habitual residence and the courts have made judgment in this regard.
A recent court decision in Spain has shed some light on the judicial process for determining the primary residence of a person for the purposes of Inheritance tax.
The question that arose before the court was to determine the main residence of the deceased for the purposes of applying the reduced value of such housing by 95 percent in the inheritance and gift tax applicable.
Where the family home is bequeathed or gifted, 95% of the property value, up to a max. of 180,000€ is exempt from Inheritance or Gift Taxes, where the beneficiary lived with the testator or donor for a period of two years or more. The proof of cohabitation is by all means admitted under the law.
On the one hand, the widow was able to substantiate the typically determining factor in which it was established that the deceased was habitually resident in the property that the widow sought as a residence.
On the other hand, the office for payment of inheritance and gift tax claimed that the primary residence was another, based on the following evidence: the very word of deceased and widow in the self-assessment tax forms where the main residence was claimed to be another as well as the death certificate which contains the same address among other municipal certificates which contained the same address.
The Court considered that the widow had not rebutted the presumed character of the property as contained in the Affidavit for the following reasons:
- The Certificate of Local Registration (which always admits evidence to the contrary) was repudiated entirely given that the property contained therein was a home sold prior to the death of the deceased, so it could not be considered the primary residence. Other data taken into account by the office manager are also irrelevant.
- The home listed in the death certificate was not certain to be that of the deceased although title was not normally necessary, it was when the deceased had many different properties as was the case here. As regards proof of which was the true habitual residence, the court opts for the habitual residence that was later used (with subsequent Certificate of Local Registration) by the widow. This was an assumption consistent with the view expressed by the two witnesses so ratifying the Affidavit. Such tests have been deemed adequate for the purpose of having proven the fact in issue, coinciding as they did with the opinion of the notary who drew up the Affidavit.
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