Non-residents may apply regional regulations to succession pacts if the deceased resided in the Basque Country

The management of succession pacts for non-resident taxpayers presents important nuances regarding the application of regional regulations. A recent binding ruling from the Dirección General de Tributos (DGT) has clarified the scope of the option these taxpayers have regarding regional regulations when the deceased resided in the Basque Country.

What the DGT has resolved

The DGT establishes that succession pacts constitute mortis causa acquisitions and are taxed based on the taxable event of inheritance or legacy. The accrual of this tax occurs at the moment the agreement is formalized or when the limitations suspending its effectiveness cease.

The technical criterion clarifies that if the greater value of the assets is located in common territory, the collection corresponds to the Agencia Estatal de Administración Tributaria (AEAT). Nevertheless, a taxpayer with non-resident status may exercise the right to opt for the regional regulations of the Autonomous Community where the deceased resided, in accordance with the provisions of Law 29/1987 on Inheritance and Gift Tax (ISD).

What this means for you

If you are a beneficiary of a succession pact and reside abroad, but the deceased had their residence in the Basque Country, you have a relevant operational advantage. Although the tax settlement must be carried out before the AEAT due to the location of the assets, you maintain the power to apply the rules of the regional regulations (in this case, Alavese, if applicable) instead of the common state regulations.

This implies that the determination of the tax base, the applicable rates, and the reductions will be governed by the legislation of the deceased's community, which can significantly alter the final tax burden of the pact.

What should be done

In a situation like this, it is fundamental to:

• Verify the civil status and habitual residence of the deceased at the time of death.
• Analyze the location of the assets to determine whether management falls to the AEAT or the regional treasury.
• Evaluate the impact of regional regulations versus state regulations to decide whether to exercise the option to apply regional law.

Given the complexity of succession pacts and the interaction between state and regional regulations, it is recommended to assess each situation individually.