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V0968-20 21 April 2020 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
IP · exención de participaciones

Wealth Tax exemption for shareholdings cannot be applied if management is exercised by a third-degree relative

A taxpayer inquired whether they could maintain the Wealth Tax exemption on their company shares if their nephew manages the business. The Directorate General for Taxes (DGT) ruled that the permitted kinship group to satisfy this requirement is limited to second-degree relatives.

The question raised

Application of the exemption for holdings in Wealth Tax in the event that the remunerated management and administration functions of the entity were performed by a third-degree collateral of the taxpayer, as no other relative of a closer degree of kinship possesses the necessary capacities and powers to hold said position.

The DGT's ruling

For the exemption of holdings in Wealth Tax, management functions must be exercised by someone within the legally established kinship group. This group includes the spouse, ascendants, descendants, or second-degree collaterals. Including third-degree collaterals, such as a nephew, would constitute an extensive interpretation of the law that is not permitted.

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