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V1338-19 10 June 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IS · reducción por donación

Requirements for donation tax reductions and their impact on Personal Income Tax and share exchange regimes

Taxpayers over 65 have consulted whether they can apply the 95% reduction in Inheritance and Gift Tax when donating shares in a holding company. The DGT clarifies that meeting Wealth Tax exemption requirements is essential and analyses the impact on the assets involved.

The question raised

1.) Application of the reduction provided in Article 20.6 of Law 29/1987, of December 18, on Inheritance and Gift Tax.

The DGT's ruling

To apply the reduction provided in Article 20.6 of the ISD Law, it is necessary to meet the exemption in the Wealth Tax pursuant to Article 4.Eight.Two of the LIP. The holdings held by the holding company in its assets shall not be counted as non-business assets if they grant at least 5% of the voting rights and are held to manage the participation with its own means. Regarding the Personal Income Tax, the transfer shall not generate a capital gain or loss if the requirements of the ISD Law are met, regardless of whether the donee applies the reduction. Notwithstanding, the operation must not have the primary objective of tax advantage in order to avoid losing the special regime for the exchange of securities.

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