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V3111-21 14 December 2021 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · reducción mortis causa

95% Inheritance Tax reduction applicable if Wealth Tax exemption requirements are met

A daughter inquired whether she could apply the 95% reduction in Inheritance Tax when inheriting her father's family business. The Directorate-General for Taxes (DGT) ruled that a necessary condition for this is that the shares were exempt from Wealth Tax.

The question raised

Request to know the criterion to be applied in the event of the death of his father. Whether, when inheriting the family business, he will be able to benefit from the 95% reduction of the tax base in the Inheritance and Gift Tax.

The DGT's ruling

The 95% reduction in the tax base for the mortis causa acquisition of shares in entities requires that these meet the exemption requirements for Wealth Tax. This requires that the entity's main activity is not the management of movable or immovable property, that the minimum participation percentages are met, and that management functions are exercised with remuneration exceeding 50% of business, professional, and personal labor income. In the case of a kinship group, the management and remuneration requirement may be met by one of the members.

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