Back to index
V0718-19 29 March 2019 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · trust

Contribution of assets to a trust is not a gift for Income Tax purposes and transfers are deemed direct

A father wishes to contribute company shares to an irrevocable trust for the benefit of his son. The DGT rules that, as the concept of a trust is not recognised in Spain, the relationships are considered direct between the settlor and the beneficiary.

The question raised

Whether the proposed operation constitutes an inter vivos transfer for gratuitous purposes of the shares between father and son, subject to Inheritance and Gift Tax, with the application of the coefficients established for Group II in Article 20.2 of the Inheritance and Gift Tax Law, as well as the reduction provided for in Article 20.6 of the aforementioned law.

The DGT's ruling

Due to the lack of recognition of the trust within the Spanish legal system, transfers of assets or income from the grantor to the beneficiary are considered direct. The establishment of a trust through the contribution of assets does not constitute a gift for Personal Income Tax purposes. The timing of the transfer and its liability for Inheritance and Gift Tax will depend on the characteristics of the trust and whether the beneficiary's powers are equivalent to ownership of the assets.

Book your free first meeting