Obligation to file Inheritance Tax in dormant estates

Managing an inheritance involves critical timing decisions, especially when heirs do not have the necessary liquidity to meet the payment of the corresponding taxes. A recurring question is whether there is an obligation to file Inheritance and Gift Tax (ISD) while the estate is in a state of dormancy (yacencia).

What the DGT has ruled

The Dirección General de Tributos (DGT) has determined that there is no obligation to file Inheritance and Gift Tax (ISD) until the acceptance of the inheritance occurs. The basis for this criterion lies in the fact that the acquisition of assets only materializes through formal acceptance. Therefore, if the estate is dormant, the taxable event that requires a declaration has not occurred.

However, the ruling warns of a relevant legal effect: the acceptance of the inheritance has retroactive effects to the date of death. This implies that if acceptance takes place once the regulatory deadlines for filing the tax have passed, the declaration will be considered filed late.

What this means for you

For individuals, this criterion confirms that it is possible to postpone the filing of the tax if they do not wish to accept the inheritance immediately. Nevertheless, this decision carries timing risks. If you decide to accept the inheritance later, you must comply with the filing deadlines counting from the date of death, which could lead to the application of penalties or interest for late filing.

It is important to highlight that the filing of the tax does not, in itself, constitute an act of acceptance of the inheritance. The taxpayer may submit the documentation without this implying the acquisition of the assets.

What should be done

In a situation involving a dormant estate, it is necessary to assess the following points:

• Analyze the liquidity situation to determine if immediate acceptance is viable.
• Keep in mind that subsequent acceptance will require declaring with retroactive effects to the date of death.
• Evaluate the consequences of a late filing if late acceptance is chosen.
• Consult the applicable regulations, including Law 29/1987 LISD and the Civil Code, to understand the effects of acceptance.