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V2316-19 9 September 2019 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · condonación de deuda

Partial forgiveness of bank debt to secure repayment of the remainder is not subject to IHT/Gift Tax

A query was raised regarding whether the forgiveness of part of a mortgage loan could be subject to Inheritance and Gift Tax. The DGT ruled that if the purpose is to ensure the collection of the remaining debt, there is no intent to make a gift (animus donandi) and therefore no taxable event occurs.

The question raised

Whether the remission of the second loan secured by a mortgage could be considered subject to Inheritance and Gift Tax.

The DGT's ruling

The remission of debt, whether total or partial, constitutes a taxable event for the ISD provided it is carried out with an intention of liberality. This intention of liberality is not presumed and must be indisputably established. In the case of financial institutions, the partial waiver of collection to ensure the recovery of the remainder of the debt does not constitute a gratuitous legal transaction, as there is no animus donandi.

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