What are opinions on the recently published bill introduced to Les Corts by the new Generalitat Government, which includes the Inheritance and Gift Tax bonus?
The PP, particularly the new president Carlos Mazón, promised to subsidize the ISD, and this has been a key priority for him. The bill is now moving through the process, clarifying two important points: it takes effect retroactively from May 28, the election date, and the bonus applies to both inheritances and donations. During the campaign, the distinction between the so-called “Death Tax” and broader tax relief was not always clear.
What does the news entail?
To understand the developments, it helps to summarize the approach: the tax base starts with the value of donated or inherited assets, from which kinship-based deductions are subtracted. The resulting tax depends on the applicable rate, and some bonuses can reduce the payable amount. The project strengthens kinship discounts by removing penalties tied to prior assets and expanding eligibility to include both spousal and grandparent-grandchild donations.
Secondly, the standout provision is a 99% bonus on the fee to be paid. This applies to descendants, spouses, and, to a certain extent, people with disabilities.
Will there be an avalanche of donations as a result of the law?
This question hinges on distinguishing between donation and inheritance. Although the Autonomous Law treats them similarly, their effects on other taxes differ. Inheritances bring notable benefits, as heirs may not need to sell assets to cover the tax, or forfeit part of the inheritance due to payment obligations. Real estate has often been the primary asset involved.
Donating, however, requires caution because the donor may face significant personal income tax costs. Numerous questions have arisen about the financial impact of donations.
What exactly does this mean? Do donors pay taxes?
That’s correct. If the donation is in cash, there are typically no tax costs when the transfer is formalized in a public title deed. If the donated asset is real estate, the situation changes. For example, consider a property purchased years ago for 200,000 euros that is now worth 400,000 euros. Selling it would trigger capital gains on the donor’s personal income tax return. Donating it, instead of selling, can still generate tax obligations, as the tax authority may treat the transfer as a taxable event. This catch is something many people overlook, and it highlights the difference between donation and inheritance in terms of tax treatment. Inheritance typically does not trigger capital gains in the same way.
In short, donating real estate can lead to personal income tax implications, while cash donations are generally straightforward from a tax perspective. Caution and planning matter.
Is the same cautious approach needed for family businesses?
Not unexpectedly, family businesses present their own complexities. The transfer through donation or inheritance affects tax, but it also hinges on strategic decisions about generational transition and business continuity. There are two exemptions in play—an extensive regional relief and a state relief—with specific conditions, including requirements around share preservation for a defined period. These details will see improvements to ensure compliance with all criteria.
Beyond tax considerations, donors and recipients must navigate the legal and financial requirements to avoid unintended tax costs. Expert advice is essential before proceeding. In family businesses, receiving donated shares also means taking on the donor’s original cost basis, which can influence future taxation on any sale. The structure of ownership, including holding companies or other arrangements, can significantly affect outcomes.
There are additional considerations, such as whether only bare assets can be donated while usufruct and voting rights remain with the donor. In family business matters, options abound and outcomes vary with each case, requiring tailored solutions based on company type and those involved.