Back to index
V2864-16 22 June 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancia patrimonial

Exemption from Capital Gains Tax on business donations requires 10-year holding period under state regulations

The taxpayer inquired whether donating a pharmacy allows for the application of state and regional Gift and Inheritance Tax (ISD) reductions and how this affects Personal Income Tax (IRPF) exemptions. The Directorate General for Taxes (DGT) ruled that the IRPF exemption for the donor depends on meeting the requirements of Article 20.6 of the ISD Law, which includes a 10-year holding period; therefore, any shorter regional reduction period is irrelevant for this purpose.

The question raised

Whether the reduction established in the aforementioned paragraph 6 of Article 20 of the Inheritance and Gift Tax Law and the capital gains exemption provided for in Article 33.3.c) of the Personal Income Tax Law are applicable to the donation, and whether the aforementioned reduction could be "supplemented" by the one established by the Autonomous Community of Castilla la Mancha without interfering with the IRPF exemption.

The DGT's ruling

In order for there to be no capital gain or loss in the donor's Personal Income Tax (IRPF) resulting from the transfer of fixed assets used for business purposes, the requirements of Article 20.6 of Law 29/1987 must be met. This implies that the required holding period is the ten-year period provided for in the state regulation and not the five-year period under the regulations of Castilla la Mancha. The application of an additional regional reduction is irrelevant to the IRPF exemption provided that the state requirements are met.

Book your free first meeting