Money received through a succession improvement pact is not subject to Personal Income Tax (IRPF)

The Dirección General de Tributos (DGT) has clarified the tax treatment of amounts received through succession improvement pacts. This issue arises from the doubt as to whether such sums must be declared in the Personal Income Tax (IRPF) self-assessment.

What the DGT has ruled

The body has determined that the transfer of assets carried out by an ascendant through an improvement pact, in accordance with Law 2/2006 on Galician Civil Law, constitutes an operation subject to Inheritance and Gift Tax. The criterion establishes that the same increase in wealth cannot be taxed simultaneously by two different taxes.

As the operation is subject to Inheritance and Gift Tax, according to Law 29/1987 and its Regulations, liability for IRPF is excluded. Consequently, the money received under this concept should not be included in the income tax return.

What this means for you

If you are an individual receiving money or assets through an improvement pact under Galician civil regulations, this criterion prevents double taxation. The increase in your wealth already fulfills its tax obligation through the corresponding inheritance tax, so there is no obligation to include it in the IRPF taxable base.

What you should do

It is necessary to correctly identify the legal nature of the transfer received. If the operation falls within the improvement pacts regulated by the Galician Civil Law, you must ensure that taxation is carried out exclusively through Inheritance and Gift Tax. Each situation must be analyzed to verify that the origin of the funds and the applicable regulations effectively correspond to this legal scenario.