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V0428-15 3 February 2015 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · nuda propiedad

95% donation reduction possible for bare property of shares and subsequent domain consolidation

The DGT confirms that a 95% reduction can be applied both at the time of donation and during domain consolidation, provided legal requirements are met.

The question raised

Valuation and settlement in the Inheritance and Gift Tax regarding the acquisition of bare ownership of shares. Taxation at the time of consolidation of ownership. Application of the reduction both upon the acquisition of bare ownership and upon the consolidation of ownership upon the death of the usufructuary. Receipt by the donor and usufructuary of remuneration for the performance of representative and executive functions in subsidiary entities.

The DGT's ruling

In the donation of bare ownership, the value is the difference between the fair market value of the shares and that of the usufruct. Upon the extinction of the usufruct due to death, taxation as a donation is applied to the value attributed to the bare ownership at its inception, applying the average tax rate and the unexhausted reductions from the first settlement. The 95% reduction may be transferred at the time of consolidation if it could not be fully applied due to insufficient tax base.

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