SPAIN Law and Practice Contributed by: Álvaro Checa, Miguel Checa, José María Vargas-Machuca Reyes and Andrea Fernández Grymierski, KINSHIP
10.2 Taxation of Trusts Unlike some other civil law jurisdictions (eg, Italy), there is no specific tax legislation in relation to trusts under Spanish tax laws. Neither the general Span- ish tax rules nor principles are fully adapted to the particularities introduced by a trust and the rights and obligations that derive from it. In the absence of such specific legislation, it is impossible to establish beyond doubt The only guidance available to date is that provided by the Spanish Tax Administration in its (published) answers to consultations made by taxpay- ers. The general position of the Spanish Tax Adminis- tration is that the legal title of the trustee under foreign law ought to be disregarded for Spanish tax purposes and that the trust fund should be assigned preferably to the settlor, where still alive, or the beneficiaries, where not. Therefore, from a Spanish tax perspective, the settle- ment of assets in trust is a non-event for tax purposes since assets in trust are still considered to be owned by the settlor. Consequently, distributions made to the settlor of the trust as beneficiary are also considered a non-event for tax purposes. The settlement of assets in trust may be considered as deemed transfer of assets for Spanish tax purposes between the settlor and a beneficiary – other than the settlor – only when the beneficiary is also the trustee, andit is clear from the particular terms of the trust that the settlement was irrevocable, the settlor can- not benefit from the trust nor does he or she have any degree of influence or control, and the beneficiary’s rights over the trust’s assets are similar to those of an owner. In such a case, the settlement of assets in trust may be considered in itself an outright gift for Spanish tax purposes from settlor to beneficiary. Whenever the trust fund is assigned for Spanish tax purposes to the settlor, it is also important to consider that upon his or her demise there would be a deemed transfer of assets by way of inheritance to the benefi- ciaries which may be subject to IHT if the beneficiaries are resident in Spain or if within the trust fund there are Spanish-situs assets or rights. The fact that the trust is discretionary is not enough from the point of view of the Spanish Tax Administration to consider that the
point of taxation under IHT should be deferred until actual distributions are made.
11. Planning for Non-Traditional Families 11.1 Succession Rights and Estate Taxes for Non-Traditional Families Spanish law generally adopts an inclusive approach to family structures, although important regional and public policy nuances remain. Same-Sex Spouses Spain legalised same-sex marriage in 2005, granting full equality with opposite-sex spouses in all areas of family law, including adoption, matrimonial property and succession. For estate planning purposes, same- sex spouses are treated identically to any married couple under Spanish private and tax law. Same-sex marriage in Spain is available regardless of nationality, meaning that its validity does not depend on whether the spouses’ national laws recognise same-sex mar- riage. Non-Marital Partners Spain does not have a unified regime for cohabiting partners. Family and succession rights depend largely on regional legislation. In Autonomous Communities with civil law competence (ie, Catalonia, the Basque Country, Galicia, Aragón, Navarra and the Balearic Islands), cohabitation may produce family and suc- cession effects similar to marriage. In the rest of Spain, registration only provides administrative rec- ognition and does not automatically grant family or inheritance rights. For IHT and GT purposes, most Autonomous Communities equate registered partners with spouses. Children Spanish law recognises full equality of filiation. Chil- dren born out of wedlock and adopted children enjoy the same succession and forced heirship rights as marital or biological children. Adoption generally extinguishes legal ties with the biological family and fully integrates the child into the adoptive family for succession purposes. However, inheritance rights vested prior to adoption remain unaffected.
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