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V3517-15 16 November 2015 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · nuda propiedad

Application of the 95% reduction to bare ownership donations and consolidation of ownership

The taxpayer inquires about the valuation and application of tax reductions regarding the donation of bare ownership of shares and their subsequent consolidation upon the death of the usufructuary. The DGT rules that a double tax benefit is possible, provided the requirements of Law 29/1987 and the Wealth Tax exemption are met.

The question raised

Valuation and settlement in Inheritance and Gift Tax regarding the acquisition of bare ownership of shares. Taxation at the moment of consolidation of ownership. Application of the reduction both upon the acquisition of bare ownership and upon the consolidation of ownership upon the death of the usufructuary.

The DGT's ruling

In the donation of bare ownership, the value is the difference between the fair market value of the shares and that of the usufruct. Upon the extinction of the usufruct, taxation is based on the value held by the bare ownership at its inception, rather than at the time of death. The average tax rate of the dismemberment of ownership shall apply, and the remainder of the 95% reduction may be applied if it was not exhausted in the first settlement.

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