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V1068-19 20 May 2019 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · reducción por empresa familiar

95% inheritance tax reduction for professional businesses denied if management was previously leased or transferred

A query was raised regarding the applicability of the 95% reduction in Inheritance Tax following the transfer of a camping business. The Directorate General for Taxes (DGT) ruled that this reduction is unavailable if the business had already been leased, as it fails to meet the requirements of habitual, personal, and direct management necessary for the exemption in Wealth Tax.

The question raised

Whether the 95 percent reduction of the tax base regulated in Article 20.2.c) of the Inheritance and Gift Tax can be applied.

The DGT's ruling

To apply the 95% reduction in Inheritance Tax, the assets must be exempt from Wealth Tax. This exemption requires that the activity be carried out in a habitual, personal, and direct manner. If the management of the business has been transferred through lease or assignment prior to death, this requirement is not met and the reduction is not applicable. However, shares in the company operating the business may benefit from the reduction if they meet the requirements for wealth tax exemption.

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