What is your take on the recently published bill presented to Les Corts by the new Generalitat Government, which includes the Inheritance and Gift Tax bonus?
The PP, led by the new president Carlos Mazón, committed to subsidizing the ISD and made this a priority. The bill is now in process and clarifies two key points: it will apply retroactively from May 28, the election date, and the bonus will cover both inheritances and donations. This answers a campaign question, since the discussions often focused on the so‑called “Death Tax.”
What does the bill actually announce?
To understand the changes, note that the tax base begins with the value of donated or inherited assets, from which kinship-based deductions are subtracted. The applicable rate determines the tax due, and the legislation may add bonuses to reduce that amount. Importantly, the project improves kinship discounts by removing penalties for prior assets and extending the relief to both spousal and grandparent‑grandchild donations.
Secondly, the standout feature is a 99% entry‑fee bonus. This applies to descendants, spouses, and, to a degree, people with disabilities.
Will donations surge under the new law?
It is essential to distinguish between donations and inheritances. Although the law treats them the same at the regional level, their impact on other taxes differs. Inheritances now provide substantial relief because heirs typically won’t need to sell assets to cover the tax or abandon the inheritance due to inability to pay. Real estate has historically been a major component of these assets.
Donors should still be cautious when giving, as the donor may face a significant personal income tax cost. Many questions have arisen about the potential financial burden of donating.
What exactly happens to the donor’s taxes?
If the donation is monetary, the process is straightforward and can be executed through a public deed without triggering extra taxes for the donor. However, if real estate is donated, the situation changes. For example, if a property bought for 200,000 euros ten years ago is now worth 400,000 euros and is donated instead of sold, the tax authority may treat the transaction as a capital gain upon donation and require payment accordingly. In such cases, the donor could incur tax as if they had sold the property, rather than simply transferring ownership.
In practice, a donor might lose the asset and still owe personal income tax on the associated gain. Many people are surprised to learn that a donation can trigger tax liabilities, especially when property is involved. Inheritance, by contrast, does not generate the same capital gain concerns for the deceased.
Does this apply to family businesses as well?
Family businesses face even more nuance. The donation or inheritance of a family business involves not only tax considerations but also strategic decisions about generational transfer and business continuity. There are two exemptions to consider: a 99% regional relief and a 95% state relief, both subject to specific requirements. The changes aim to improve how these rules are applied, including conditions like maintaining a stake for a certain period.
To avoid personal income tax on donations, similar precautions are necessary as with real estate, and it remains critical to seek thorough advice before proceeding. Unlike inheritance, when shares in a family business are donated, the recipient may inherit the donor’s original cost basis, which can create substantial tax disparities if the business is later sold. Holding structures that keep assets ready for sale can influence outcomes significantly.
There is also the option to donate bare property while preserving usufruct and voting or control rights. The landscape in family business matters is broad, with many possible paths and distinct results depending on the company type and the people involved. Each scenario often requires a tailored solution aligned with the company’s structure and goals.