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V0223-24 28 February 2024 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · reducción en la base imponible

95% Gift Tax reduction unavailable without Wealth Tax exemption

Consultants inquired whether donating shares in a real estate leasing company allows for a 95% reduction in Inheritance and Gift Tax. The DGT ruled that this is not applicable as the requirements for exemption from Wealth Tax are not met.

The question raised

1- Whether the mentioned entity carries out an economic activity, and whether this differs from the mere management of real estate assets, since its classification will determine the ability to apply the exemption, considering that all its properties are dedicated to the activity as they are leased/rented.

The DGT's ruling

To access the 95% reduction in Inheritance and Gift Tax, donors must be entitled to the exemption in Wealth Tax. In the case of real estate leasing, for an economic activity to exist, at least one employee with a full-time employment contract is required. This requirement is not met if the same person performs both the management of the activity and the management functions, as the employment contract must be for the leasing activity and not for management functions. Furthermore, the taxpayer or a member of the family group must perform management functions receiving the corresponding remuneration.

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