NEWS TAX ON SUCCESSIONS AND DONATIONS CATALONIA

12-05-2020

Special incidence to successions with family business

On April 24, 2020, the Budgets for the Autonomous Community of Catalonia were approved and, as a consequence, modifications have been introduced in the Inheritance and Donations Tax that is applicable in Catalonia.

The main novelties, as will be seen later, are the introduction of a multiplier coefficient based on pre-existing assets and the reduction of the bonuses that could be applied to the quota. The above implies an increase in the amount of the tax to be paid.

The current tax tables are maintained and therefore continue to be as follows:

The reduced tax table applies to donations of Kinship Groups I and II (acquisitions by descendants and adoptees, spouses, ascendants and adopters) as long as it is formalized in a public deed.

Regarding the applicable modifications, we find the following:

Introduction multiplier coefficients

The multiplying coefficients of pre-existing patrimony by degree of relationship with the deceased (person who has died) are reintroduced for the determination of the liquid quota to be paid for both successions and donations.

This new scale of correction coefficients affects only taxpayers of Kinship Groups I and II (acquisitions by descendants and adoptees, spouses, ascendants and adopters), who may see an increase in the final fee to be paid by up to 20% if their assets pre-existing exceeds 4 million euros.

The coefficients are as follows:

That is, unlike what happened until now, the resulting quota of the first two tables has to be multiplied by the previous coefficients. (Example a child with a pre-existing equity of € 700,000 and a fee to be paid of € 23,000 would pay with the application of the new coefficients 23,000 * 1.1 = € 25,300)

Reduction bonus in mortis-causa acquisitions

Various modifications have been made to the mortis-causa acquisition bonus:

  1. So far, the kinship bonus table applicable to Group I (acquisition by descendants and adoptees under 21 years of age) and Group II (acquisitions by descendants and adoptees of twenty-one or more years, ancestors and adopters) was unique. Now a new bonus table is created for those who are included in kinship group II, leaving the one existing until now only for group I.
  2. Those taxpayers who choose to apply the requested bonuses and reductions (except the reduction for transmission of the habitual residence), lose the right to apply the relationship bonus, except in the case of acquisitions by the spouse. To date they applied the bonus table reduced by half if, for example, they applied any of the requested reductions such as the so-called family business that has a 95% bonus

In any case, the 99% 100 relationship bonus is maintained in transmissions cause of death between spouses.

The new Kinship Bonus Tables become as follows:

As we said before, these bonuses no longer apply when the 95% family business bonus is applied.

Conclusions:

The modifications applied to the Inheritance and Gift Tax imply a higher taxation for the following:

  • The application of the coefficients for pre-existing patrimony imply that the greater the prior patrimony of the recipient of the inheritance or donation, the higher the tax payment.
  • The discounts on the quota are reduced except in the case of spouses and Group I (acquisition by descendants and adoptees under 21 years of age).
  • People who apply the 95% discount for acquiring a family business lose the right to apply the discount in installments on the rest of the assets.

Comment that the reduction of the bonuses to be applied and the effect of the multiplying coefficients may imply a considerable increase in the amount to be paid and even from a fiscal perspective it may end up being in some cases more interesting a living donation than a mortis acquisition especially causes when there is a family business involved.

At the same time, family businesses will have to be very attentive to decouple the assets subject to economic activities from the unaffected since the 95% discount will only be applicable with respect to the former and with the new potential quotas it will be much easier to locate ourselves in the environment of tax crime.

If you require more information, do not hesitate to contact us through 932386043.