Heirs of a family business will lose the reduction if one of them fails to comply with maintenance requirements

Managing the continuity of a family business after the death of a decedent involves responsibilities that transcend the individual will of each heir. The Dirección General de Tributos (DGT) has specified the tax consequences when the transfer of business assets occurs without a will or through joint ownership (proindiviso), directly affecting the application of reductions in Inheritance and Gift Tax (ISD).

What the DGT has resolved

The tax authority's criteria focus on the nature of the group of heirs formed in cases of intestate inheritance or when assets are received in joint ownership. According to the interpretation of Law 29/1987, the 95% reduction on the value of the family business benefits all successors equally regarding the portion of the asset's value included in their tax base.

The resolution determines that, once a group of heirs is constituted, compliance with the continuity requirements is a collective condition. Therefore, if even one co-heir fails to fulfill the duty to maintain the value of the family business during the required period, the reduction is lost for all beneficiaries. In this scenario, the heirs must pay the portion of the tax that was not originally paid, along with the corresponding late payment interest.

What this means for you

If you are an heir to a family business and the transfer is not carried out through a will that individualizes the assets, or if the heirs maintain ownership in a shared manner (proindiviso), your tax benefit depends on the behavior of the others.

• Collective risk: The decision or non-compliance of a single co-heir can void the tax benefit for all members of the group.
• Economic impact: The loss of the 95% reduction implies not only paying the principal tax but also the late payment interest generated since the moment of succession.
• Tax base: The benefit applies to the portion of the company's value that constitutes each heir's tax base.

What should be done

In situations involving the succession of family businesses, it is necessary to evaluate the structure of the transfer. The existence of a will that allows for a clear adjudication of assets can prevent one heir's situation from compromising the tax position of the others. It is essential to analyze the composition of the group of heirs and the continuity commitments required by regulations to ensure the stability of the tax reduction.