Income from an inheritance received by a non-profit entity will be taxed if it derives from an economic activity

Non-profit entities that do not hold the status of public utility are subject to a partial exemption regime. This implies that, while certain incomes obtained free of charge are exempt, the nature of the management of those assets may determine the obligation to pay Corporate Tax (Impuesto sobre Sociedades).

What the DGT has resolved

The query analyzed whether income derived from an inheritance (consisting of money and properties intended for rent) should be considered exempt, given that its exclusive purpose was to finance the entity's social activity. The Dirección General de Tributos (DGT) has determined that income from acquisitions for value (a título lucrativo) is only exempt if obtained in fulfillment of the social purpose and provided it does not derive from economic activities.

The criterion establishes that if the management of the inherited assets involves the organization of production means or human resources, the income generated will be subject to tax. In the specific case of real estate leases, the administration considers that an economic activity exists when at least one person is employed with a labor contract and full-time working hours to manage said assets.

What this means for you

For non-profit entities, receiving assets through inheritance does not guarantee automatic exemption from the income it generates. The determining factor is not the origin of the assets (the inheritance itself), but the way they are managed to produce income. If the entity uses an organized structure, with staff hired for the exploitation of those assets, the Administration will consider that it is carrying out an economic activity subject to Corporate Tax, regardless of whether the profit is entirely allocated to social purposes.

What should be done

It is necessary to analyze the operational structure with which the entity manages its inherited assets. If the management of real estate or financial assets requires hiring staff or organizing production means, the entity must plan for the inclusion of that income in its Corporate Tax taxable base. It is recommended to assess the organization of asset management to determine whether the requirements for economic activity are met according to the regulations of Law 27/2014 and Law 49/2002.