Donation of shares: the ten-year period for the Personal Income Tax exemption

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the application of the exemption in Personal Income Tax (IRPF) when the donation of company shares occurs. The central issue was to determine whether the asset holding period should be adjusted to regional regulations or to state legislation.

What the DGT has resolved

The inquiry raised whether the donee should hold the shares for five years, according to regional regulations, or for ten years, in accordance with the Inheritance and Gift Tax Law. The DGT has resolved that the donor's IRPF exemption is governed by Article 20.6 of Law 29/1987.

Consequently, to prevent a capital gain from occurring upon transfer, the donee is obliged to maintain what was acquired and retain the right to the exemption in Wealth Tax during the ten years following the donation. The agency clarifies that the requirements established by regional regulations are irrelevant for the application of this IRPF provision.

What this means for you

This ruling has a direct impact on the planning of the transfer of company shares. If you are the donor and seek to avoid taxation on the capital gain derived from the donation, the validity of said exemption is conditional upon the long-term behavior of the donee.

• For the donor: The exemption is neither immediate nor definitive; it depends on the recipient fulfilling the permanence requirement.
• For the donee: There is a burden to maintain ownership of the shares for a period of ten years to ensure the correct application of the rule.
• For the corporate structure: The ownership of the commercial company will be subject to this immobilization period for tax purposes.

What should be done

In an operation of this type, it is necessary to evaluate the donee's intention to remain a holder. Since state regulations prevail over regional ones in this case, the ten-year period must be the central axis of any tax impact analysis. It is recommended to assess each particular situation to ensure that the donation structure complies with the requirements of Law 29/1987 and the IRPF Law (LIRPF).