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Reduction for Transfer of Business: DGT doctrinal evolution

How the DGT's position on this topic has evolved, and the rulings it rests on.

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How the DGT's position has evolved

Settled doctrine High confidence 8 rulings · 2014–2022

Current position

To apply the reduction under Article 20.6 of Law 29/1987, the donor or deceased must cease their management functions and stop receiving remuneration for them, prioritizing the objective nature of the functions over the title of the position. The assets must be exempt from Wealth Tax, which in agricultural holdings requires them to represent at least 50% of the IRPF (Personal Income Tax) taxable base. In the case of leases, the activity is only considered economic if it has at least one full-time employee.

The DGT's position remains constant regarding the requirement to cease functions and remuneration, but it has increasingly specified the requirements for economic activity and the exemption from Wealth Tax. Greater specificity is observed in defining what constitutes an economic activity (labor employment) and how the main source of income is proven in agricultural holdings.

Turning points

  1. V2630-15

    Establishes that the objective nature of the functions prevails over the title of the position for the cessation of management functions.

  2. V3662-15

    Defines that the agricultural holding is the main source of income if at least 50% of the IRPF taxable base comes from it.

  3. V0712-22

    Determines that the leasing of real estate is only an economic activity if it employs a person with a full-time employment contract.

Analysis based on 6 of 8 rulings with a stated position. Updated 1 October 2026.

Rulings on this topic

8
V2978-18 19 Nov 2018

Business transfer tax reduction requires donor to cease management functions

SG de Impuestos Patrimoniales, Tasas y Precios Públicos
reducción por transmisión de empresafunciones de direccióndonación inter vivosexención impuesto sobre el patrimonionegocio profesional LISD — Ley 29/1987 de Sucesiones y Donaciones art. 20.6LIP — Ley 19/1991 del Impuesto sobre el Patrimonio art. 4.8
Affects CompanyExpat · Non-residentIndividual
V0036-18 11 Jan 2018

Reduction for business transfer is not applicable if the transfer of interest in the premises does not involve intergenerational transfer of the business

SG de Impuestos Patrimoniales, Tasas y Precios Públicos
reducción por transmisión de empresatransmisión intergeneracionalgrupo de parentescoexención en el impuesto sobre el patrimonioadquisición mortis causa LISD — Ley 29/1987 de Sucesiones y Donaciones art. 20.2.cLIP — Ley 19/1991 del Impuesto sobre el Patrimonio art. 4.Ocho.Dos
Affects CompanyExpat · Non-residentIndividual
V3662-15 24 Nov 2015

95% Inheritance Tax reduction applicable to the transfer of an agricultural holding

SG de Impuestos Patrimoniales, Tasas y Precios Públicos
reducción por transmisión de empresaexención en el impuesto sobre el patrimonioprincipal fuente de rentaexplotación agrícolaadquisición mortis causa LISD — Ley 29/1987 de Sucesiones y Donaciones art. 20.2.cLIP — Ley 19/1991 del Impuesto sobre el Patrimonio art. 4.Ocho.Uno
Affects CompanyExpat · Non-residentIndividual

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