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V1969-15 23 June 2015 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · nuda propiedad

Application of the 95% reduction to bare ownership donations and consolidation of ownership

The taxpayer inquires about the valuation and application of tax reductions regarding the donation of bare ownership of shares and their subsequent consolidation upon the death of the usufructuary. The DGT clarifies that the double tax benefit may be applied provided the requirements of Law 29/1987 and the Wealth Tax exemption are met.

The question raised

Question posed: Valuation and settlement in the Inheritance and Gift Tax of the acquisition of the bare ownership of the shares. Taxation at the moment of the consolidation of ownership. Application of the reduction both upon the acquisition of the bare ownership and upon the consolidation of ownership upon the death of the usufructuary. Receipt by the donor and usufructuary of remuneration for the performance of representative and executive functions in subsidiary entities.

The DGT's ruling

In the donation of bare ownership, the value is the difference between the actual value of the shares and that of the usufruct. Upon the extinction of the usufruct due to death, taxation for the donation is carried out using the value the shares held at the time of the dismemberment of ownership. The remainder of the 95% reduction shall be applied if it was not fully exhausted in the initial settlement due to insufficient tax base. Performing management functions in subsidiaries does not prevent the reduction if the business activity requirements are met in the donated entity.

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