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V3426-15 10 November 2015 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
IP · comunidades de aguas

Partners in companies participating in Water Communities may access the Wealth Tax exemption if they meet the legal requirements

A query is made as to whether the returns from companies holding shares in Water Communities of the Canary Islands constitute economic activity and whether their holdings are exempt from Wealth Tax. The DGT determines that the returns are income from movable capital, but that this does not prevent the wealth tax exemption if the legal requirements are met.

The question raised

Question posed: Nature and classification of the return attributed to family commercial companies by the water communities in which they participate as a consequence of the ownership of "water shares". Whether such returns attributed to the community of property could be considered returns derived from the exercise of an economic activity and whether the existence of an economic activity of securities management and water sales should be considered at the seat of the family companies. Whether, consequently, the holdings in the family companies would be exempt from Wealth Tax and, if applicable, whether the reduction provided for in Article 20.2.c) of the Inheritance and Gift Tax Law would apply to their "mortis causa" transfer.

The DGT's ruling

The returns received by the Water Community companies have the nature of income from movable capital. Nevertheless, holdings in said companies may be exempt from Wealth Tax if the requirements regarding minimum ownership, kinship group, and management functions are met. Furthermore, the 95% reduction in Inheritance and Gift Tax may be applied in accordance with current regulations.

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