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V0543-18 26 February 2018 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
IP · exención en el impuesto sobre el patrimonio

95% Inheritance Tax reduction applicable if Wealth Tax exemption requirements are met

A taxpayer queried whether shares in a Spanish company, whose parent is an Andorran holding company, qualify for Wealth Tax exemption and the reduction for acquisitions mortis causa in Inheritance Tax. The DGT ruled that the requirements for the wealth tax exemption are met, although the assessment of whether certain assets (such as loans) are tied to the business activity remains the responsibility of the tax administration.

The question raised

Exemption from Wealth Tax. Potential application of the reduction provided for in Article 20.2.c) of the Inheritance and Gift Tax Law.

The DGT's ruling

To qualify for the exemption from Wealth Tax, the requirements regarding ownership, minimum shareholding, and remunerated management functions must be met. The scope of the exemption is adjusted to the proportion of assets allocated to the economic activity, and the management body must assess whether the granting of loans to group companies is considered an allocated activity. If the wealth tax exemption is met, the 95% reduction in Inheritance Tax shall be applied in accordance with current regulations, respecting the proportionality rule of the allocated assets.

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