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V2792-18 24 October 2018 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · reducción sucesoria

Family business reduction not applicable if the deceased did not pay Wealth Tax on those shares

A consultation was made regarding the applicability of the reduction under Article 20.2.c) of the Inheritance and Gift Tax Law to shares in a Mexican entity. The Directorate General for Taxes (DGT) ruled that it is not applicable because the deceased did not pay Spanish Wealth Tax on those specific shares.

The question raised

Application of the reduction provided for in Article 20.2.c) of the Inheritance and Gift Tax Law.

The DGT's ruling

To apply the inheritance reduction provided for in Article 20.2.c) of Law 29/1987, it is a prerequisite that the assets enjoy the exemption from Wealth Tax. This requires that the holder be subject to the tax by personal or real obligation with respect to said assets. If the deceased is subject to tax only by real obligation regarding other assets distinct from the shares, they are not entitled to the exemption and, therefore, the reduction is not applicable.

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