Inheritance Tax, Donations, and Capital Transfers in Spain
Inheritance Tax and Donations
Nature and Character
The inheritance and gift taxes are direct and subjective in nature, taxing asset increases obtained by individuals through inheritance or gift. They are characterized by:
– Direct (on capital or wealth) – Subjective (the amount of tax depends on the taxpayer’s previous wealth and their degree of kinship with the deceased or donor) – Personal (the taxpayer is the individual who acquires the assets subject to tax) – Progressive tax rates – Ceded to the Autonomous Communities (CCAA)
Taxable Event
The taxable event is the acquisition of property at no cost or for an increase in value for an individual, due to inheritance, gift, or certain insurance policies.
Taxable Person
The taxpayer is the individual who receives the taxed increase:
– In acquisitions mortis causa (due to death), the heirs – In donations and other non-profit transfers during life, the donee or their beneficiaries – In life insurance, the beneficiaries
Taxable Income
The taxable income is the tax base:
– In transmissions mortis causa, the net worth of the individual acquiring the property in each case, meaning the actual value minus the assets and rights by the burdens and debts that may be deductible – In donations and other non-profit transfers during life, the net value of the property and acquired rights, meaning the actual value minus the assets and rights by the burdens and debts that may be deductible – In life insurance, the amounts received by the beneficiary
The tax base is generally determined under the direct estimate method.
Taxable Base
– In acquisitions mortis causa, including the beneficiaries of life insurance policies, the taxable base is obtained by applying the reductions set forth in the Tax Act. Additionally, the CCAA may create their own reductions and may regulate the state regulations established by improving them by increasing the amount or the percentage of reduction. – In acquisitions during life, the taxable base coincides with the payable tax, however, the Law provides for two abatements.
Fee
To determine the tax, several operations should be performed:
– First, the applicable tariff should be applied to the entire payable base. – After that, the multiplier coefficients will be applied to the resulting fee, which depend on the degree of kinship and wealth of the taxpayer. – Finally, where appropriate, a deduction for the net quota should be applied.
Accrual
In acquisitions mortis causa and life insurance, the tax is levied on the death of the deceased or the transfers during life. In donations, the tax accrues on the day the act or contract is made to make them effective.
Declaration
– Donations: 6 months – Mortis causa: 1 month
Tax on Capital Transfers and Documented Legal Acts
Nature
Excise tax, real and objective.
Scope and Structure
The tax is levied on the movement or transfer of wealth. It is defined in three ways:
– Onerous economic transmissions (not subject: profit transmissions, which are subject to Inheritance and Gift Tax, and transmissions within a business, which are subject to VAT) – Corporate operations – Documented legal acts
The first two forms are incompatible: a single act cannot be taxed as both an onerous transmission and a corporate operation. However, an act can be taxed as an onerous operation or transmission as well as a corporate and documented legal act. In the latter case, two different acts are actually taxed: the operation considered onerous or corporate itself and such operation as it is documented.
Field Space. Subject Criteria
– Throughout the Spanish territory, subject to special tax regimes due to the territory or international treaties or conventions. – The criterion for determining the subject is territoriality.
Capital Transfers
Nature and Scope
This tax involves a complex nature since it taxes the transfer of assets not only for a price but also by other legal transactions that cannot be classified as transmissions.
Taxable Event
Capital transfers are subject to the onerous acts inter vivos of all goods and rights that make up the assets of individuals or legal entities outside the business or profession.
Exemptions:
– State, Red Cross, Catholic Church, etc. – Exemptions granted by treaties – Contributions to marriage and transmissions in settlement of marital dissolution
The taxable event is the transfer of assets: the day they perform the act or contract taxed.
Taxable Person
The taxable person is the individual who acquires the property or rights or those on whose behalf the act is performed.
Tax Base
The tax base is the real value of the transferred property or rights that are or are transferred.
Fee
The corresponding rate is applied to the proportional taxable base.
Tax Management. Verification of Values
– The reverse charge will be imposed generally by the taxpayer. – The deadline for submission of settlement declarations will be 30 working days from the date on which the act or contract is caused. – The Administration may, in any case, check the real value of the property and transferred rights.
Corporate Transactions
Taxable Event
Corporate transactions are subject to: the creation, increase, and decrease of capital, merger, division, and dissolution of companies, basically.
Taxable Person
Generally, the recipient of funds.
Documented Legal Acts
Taxable Event
The documentation is subject to acts of the fact that tax assessment. Subject:
– Notarial documents: they are subject to the Scriptures, Acts, and Documents – Trade Testimonials: they are the drafts and documents made swivel function or supplement those – Administrative documents: they are the rehabilitation and transmission titles, and in some cases, the notations to be practiced in the public records.
Taxable Person
The Act expressly states in each case who is the taxpayer’s taxable.
Exemptions
– Subjective exemptions: State, Public Administration, Spanish Red Cross – Objective exemptions: to provide for spouses in conjugal society
Accrual
Occurs the day the transfer or corporate operation is formalized or the documented legal act is made.