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V3165-20 22 October 2020 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · transmisión inter vivos

Inheritance Tax reduction does not apply if the donee is a nephew

A query was raised regarding whether the donation of shares in a real estate leasing company to a nephew allows for a reduction in the taxable base. The Directorate General for Taxes (DGT) ruled that this is not possible due to the degree of kinship and because leasing activities do not qualify as an economic activity.

The question raised

Whether the management employment contract signed by the aunt of the company is considered to fulfill the requirement regulated in Article 27.2 of Law 35/2006.

The DGT's ruling

The reduction provided in Article 20.6 of the LISD is not applicable because the acquirer is a nephew and not a spouse, descendant, or adopted child. Furthermore, for the leasing of real estate to constitute an economic activity and qualify for the Wealth Tax exemption, it is required to employ at least one person under a full-time employment contract who is external to the administration of the entity. In this case, as the administrator and owner themselves manage through an employment contract, the minimum infrastructure requirement is not met.

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