Impediment to applying the seniority reduction on properties inherited after 1994

The Dirección General de Tributos (DGT) has issued a relevant ruling for individuals transferring real estate assets received through inheritance. The inquiry focused on determining whether it was possible to apply the reduction provided for in the Ninth Transitional Provision of the Personal Income Tax Law (LIRPF) to reduce the capital gain upon the sale of a property.

What the DGT has resolved

The advisory body has determined that the aforementioned reduction is not applicable when the property was acquired after December 31, 1994. The key point of the resolution lies in determining the moment of acquisition of the asset in the case of successions.

According to the regulations and the Civil Code, in the case of inheritances, the acquisition date of the property is the date of the death of the deceased. Since the death and the subsequent acquisition of the asset occurred in 2002, the indispensable temporal requirement demanded by the Ninth Transitional Provision of the LIRPF to access this capital gains reduction regime is not met.

What this means for you

This ruling has a direct impact on taxpayers selling inherited properties. There is a belief that the seniority of the property within the deceased's estate could allow access to tax benefits, but the administration establishes that what matters is the date on which the heir acquires ownership of the asset.

If the death occurred after 1994, the capital gain derived from the sale will be calculated without the seniority reduction provided for in the cited transitional provision. This implies that the tax burden from the transfer of the property could be higher than expected if the applicability of this benefit is erroneously assumed.

What should be done

It is fundamental to accurately verify the acquisition date of any property intended to be transferred, especially if it comes from a succession. It is necessary to compare the date of the deceased's death with the time limits established in the LIRPF to avoid errors in the tax settlement. Since each wealth situation presents particularities, it is recommended to assess each case individually to determine the correct tax treatment.