The new EU inheritance law

Since August 2015, the new EU inheritance law has been in force, which is intended to regulate the entire law of succession in the case of touching inheritance cases in the member states of the EU (except Great Britain, Ireland and Denmark).

One of the most important aspects of the EU inheritance law regulation also affects EU citizens resident in Ibiza. This group of residents in Spain should make a choice of law regarding the applicable law of succession in a will. Those who do not have a permanent residence in Spain do not necessarily have to take action.

Resident EU citizens may have already had a will drawn up in the past by a civil law notary or lawyer and this will contains provisions that should be implemented after their death. Since this summer, however, a decisive change has taken place as a result of the EU inheritance law regulation: The will is no longer subject to the law of the country of origin, but to Spanish law, since the law of succession of the country in which the testator had his last “habitual residence” applies. Since the term “habitual residence” is not defined by law, it must be interpreted in practice. If the testator commutes back and forth between Ibiza and Germany in the years before his or her death, it depends on where the centre of his or her life is. In many cases, the circumstances will indicate Ibiza as the “usual place of residence”. This means that Spanish inheritance law has been in force since August, regardless of whether a will has been drawn up or not.

Spanish inheritance law does not apply to the entire national territory, but is divided into formal rights according to the autonomous region. The law of succession therefore varies greatly in Andalusia, Catalonia or the Balearic Islands. In general, it can be said that according to the legal succession in Spain only the children inherit and the surviving spouse has a right of sneezing. However, in Ibiza and Formentera, formal law does not even allow the surviving spouse to have a right of sneezing! The testator can only dispose of a part of his or her estate, a substantial part of which is governed by the law and cannot be overridden by a will.

Fortunately, the EU inheritance law regulation allows a choice of law. However, you cannot choose any law, but only a law of succession to which the testator has a clear connection.

What does this mean in practice? For almost all EU citizens resident in Ibiza, a will with a choice of law is necessary if one wants to avoid Spanish law being applied in the case of inheritance.

Please also note the new Spanish inheritance tax law: At the beginning of 2015, the discrimination of non-residents in Spain with regard to inheritances and gifts has been legally abolished. Non-residents in Ibiza can now benefit from the tax advantages of the Balearic inheritance and gift law if the property that is part of the estate is located on the Balearic Islands. For 1st order heirs (children, parents), only 1 per cent of inheritance tax is payable, and 7 per cent of gift tax is payable for gifts. In addition, 1st order heirs who have paid too much inheritance tax in previous years can apply for a refund of inheritance tax at the relevant tax office in Madrid.