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V3021-21 3 December 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · pacto de mejora

Transfer of assets via improvement pacts is not subject to Personal Income Tax as it is considered a gratuitous transfer mortis causa

The taxpayer inquired whether transferring investment funds and shares to their children through an improvement pact under Galician civil law triggers capital gains tax. The Directorate General for Taxes (DGT) ruled that, as it is a succession pact, it is considered a gratuitous transfer mortis causa, and therefore no capital gain or loss arises for Personal Income Tax purposes.

The question raised

Impact of the transfer on the Personal Income Tax (IRPF) taxation of the beneficiary.

The DGT's ruling

The transfer of assets through improvement pacts is considered a lucrative transfer mortis causa for the application of Article 33.3.b) of the Personal Income Tax Law (LIRPF). This criterion extends to other succession pacts other than the Galician separation provided by the various regional laws. Therefore, no capital gain or loss is deemed to exist in these transfers.

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