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V0940-22 29 April 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
ISD · reducción de la base imponible

95% Gift Tax reduction applicable if family group meets Wealth Tax exemption requirements

A taxpayer inquired whether a 95% reduction in Gift Tax could be applied when donating company shares to their children. The Directorate General for Taxes (DGT) ruled that this is possible provided the Wealth Tax exemption requirements are met, which may be satisfied collectively by the family group.

The question raised

1.) Exemption of corporate holdings from Wealth Tax and application of the 95% reduction of the taxable base in Gift and Inheritance Tax when the consultant donates their holdings in favor of their children and ceases to act as the company administrator.

The DGT's ruling

For the 95% reduction in Gift Tax, it is a necessary condition that the holdings are exempt from Wealth Tax. The requirement to perform management functions and receive remuneration exceeding 50% of the yields may be met by any of the members of the kinship group. If the requirements of the LISD are met, no capital gain or loss shall be considered for Personal Income Tax purposes for the donor.

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