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V3770-15 30 November 2015 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
IP · exención

Property rental activity may be exempt from Wealth Tax if it is the primary source of income

The inquirer asks about Wealth Tax exemptions for property rental activities, the treatment of undistributed profits in family businesses, and the deductibility of debts in inheritance cases. The DGT clarifies the requirements for economic activity, the calculation of profits to qualify such activity, and the validity of private debts for Inheritance Tax purposes.

The question raised

Exemption from Wealth Tax for family business real estate leasing. Computation of undistributed profits in a corporate family business for the purposes of the Wealth Tax exemption. Deductibility of the deceased's debt via loan.

The DGT's ruling

For the leasing of real estate to be exempt, it must constitute an economic activity according to the Personal Income Tax (IRPF) and represent the primary source of income (at least 50% of the tax base). The exemption applies to both separate and community property assets used for the activity. To determine whether an entity manages assets or carries out business activity, those assets whose acquisition price does not exceed the undistributed profits of the current year and the ten preceding years shall not be computed as non-business assets. In successions, debts documented in private instruments must comply with the requirements of the Civil Code or their existence must be justified.

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