There are many aspects to assess in the transmission of heritage to the next generation. The tax impact of said transmission is one of the most relevant.
In Andalusia, donations between ascendants, descendants and spouses do not practically support taxation by the Inheritance and Gift Tax, since since April 2019 a 99% bonus has been applied in the share of this tax. Possible future changes limiting this bonus have raised concerns about donations. Is the current situation in any case so beneficial for donations
What limitations will there be in the future
Properly assessing such an important decision – the total or partial transmission of the heritage to the next generation – requires clearing up these unknowns.
Current taxation of donations in Andalusia
The Tax on Inheritance and Donations is a tax partially ceded to the autonomous communities, the taxation being different in each one of them. Therefore, to determine the taxation applicable to a donation, the first thing is to analyze which is the applicable regional legislation. In general, Andalusian legislation applies in the case of donation of real estate in Andalusia and in the case of donation of other types of property when the donee is resident in Andalusia. For the purposes of determining this residence, the period of five years prior to the donation is computed.
Donations subject to Andalusian legislation are discounted by 99% in the Inheritance and Gift Tax quota, provided that the acquirers are descendants, ascendants or the spouse. The discount is also extended to the cases provided for equalization: unmarried couples and permanent family foster care and guardianship for adoption purposes. Therefore, other taxpayers such as siblings or cousins ​​are not covered by this bonus. The application of the bonus requires that the donation be formalized in a public document, justifying in it the origin of the funds in case the object of transmission is cash, current account or similar.
It must be appreciated that a donation can determine the accrual of other taxes
A donation, however, can determine the accrual of other taxes. The donation of an asset or right may mean that the transferor obtains a capital gain for the difference between the acquisition value of the asset or right transferred and its market value at the time of the donation. This capital gain is part of the tax base of savings, which, after integrating other capital gains or losses of the taxpayer, is subject to tax rates of 19%-21%-23%. It is foreseen in the PSOE-Podemos government agreement that the maximum rate to be applied to savings income becomes 27% for incomes over 140,000 euros.
However, certain capital gains are exempt from taxation, such as that derived from the transmission of the habitual residence by persons over 65 years of age. And there are transfers in which it is estimated that there is no capital gain or loss, as in the case of donations from family businesses by people over 65 years of age who abandon the activity or the exercise of management functions. For these purposes, family businesses are understood as those individual companies or professional businesses that constitute the main source of income of a taxpayer for the exercise of their activity in a personal, habitual and direct way; or also the participation in a company that carries out an economic activity, its capital is at least 20% titled by the family group (taxpayer, spouse, ascendants, descendants and collaterals up to the second degree) or 5% at the individual level and a member of the aforementioned family group exercises managerial functions, thus receiving their main source of income from work and economic activities. These transmissions of family businesses are subject to maintenance requirements by the acquirer during the 10 years following the donation, who will be subrogated in the age and fiscal cost of the assets at the donor’s headquarters. This supposes that the value of the goods is not updated, unlike what would happen in a transmission by succession. These transmissions of family businesses are subject to maintenance requirements by the acquirer during the 10 years following the donation, who will be subrogated in the age and fiscal cost of the assets at the donor’s headquarters. This supposes that the value of the goods is not updated, unlike what would happen in a transmission by succession. These transmissions of family businesses are subject to maintenance requirements by the acquirer during the 10 years following the donation, who will be subrogated in the age and fiscal cost of the assets at the donor’s headquarters. This supposes that the value of the goods is not updated, unlike what would happen in a transmission by succession.
In addition to the foregoing, if the asset to be donated is urban real estate, the Tax on the Increase in Value of Urban Land or municipal capital gains will accrue, provided that there has been an increase in the value of the land. This tribute will have to be deposited by the donee in the corresponding town hall or county council.
Potential future changes
There is great concern about possible future changes in the taxation of donations. Although in some autonomous communities such as the Canary Islands they have recently eliminated the general bonuses in terms of inheritance and donations, in Andalusia the latest regulatory changes incorporated in the Budget Law for the year 2020 have even come to improve their taxation, since they have been reduced temporary requirements for the application of certain reductions in the tax base, generally passing from 5 years to 3 years. However, at the state level, the need to harmonize the tax has been raised on numerous occasions, an issue that has recently gained currency.
individualized analysis
The above conditions do not allow a generalized recommendation to be given, but instead determine that it is necessary to study case by case the advisability or not of making a donation, analyzing in detail the set of fiscal implications in the different taxes that may be applicable, as well as the other existing personal, family and patrimonial circumstances.
