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V2677-20 2 September 2020 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · reducción en la base imponible

95% reduction in gift tax on shares depends on Wealth Tax exemption

A taxpayer has inquired whether a 95% reduction can be applied to the taxable base of a gift of company shares. The Directorate General of Taxes (DGT) states that this is only possible if the shares are exempt from Wealth Tax and if specific requirements regarding age, management roles, and economic activity are met.

The question raised

Compliance with the conditions provided in Article 20.6 of Law 19/1987 on Inheritance and Gift Tax to apply the 95 percent reduction of the tax base in the donation presented.

The DGT's ruling

The 95% reduction in the donation of shares requires that the donor holds the exemption in Wealth Tax and that the donee maintains it for ten years. For the real estate leasing activity to be considered an economic activity for the purposes of said exemption, it must have at least one employee with a full-time employment contract. Compliance with the reduction also requires that the donor be 65 years of age or have a permanent disability, and that they cease to perform management functions.

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