Law of Successions and Donations Catalonia
The “LLEI 5/2020, of April 29, of fiscal, financial, administrative and public sector measures and creation of the tax on installations that affect the environment”, has meant a very considerable increase in inheritances and donations in Catalonia.
The timeliness of this law and its date of entry into force, which is May 1 of this year, has been harshly criticized by the pandemic that we are going through with its consequent increase in the number of deaths.
He has also been surprised by the limited media coverage it has had, despite the considerable increase in inheritance and donation tax that will take place in Catalonia, as of the entry into force of this law.
The modification of this tax in Catalonia can be summarized in three blocks:
First. – In the first place, the bonuses that are applied in quota and that existed until now in the inheritances of the people included in group II, which are the children of 21 years or more and the ascendants, are reduced. This group of people, as of May 1, will see the quota increased in those inheritances they receive, in a very important way. Spouses are not included, because they already have a fixed 99% bonus that has not been altered by the reform.
Comparative table is attached to value the magnitude of the change:
SCALE II OF FEE BONUSES :
| FEE TO PAY | FEE TO PAY | |
| INHERITANCE AMOUNT | UNTIL 04/30/20 | FROM REFORM |
| 200,000 | 180 | 3,825 |
| 300,000 | 1,610 | 10,350 |
| 400,000 | 1,900 | 19,000 |
| 500,000 | 3,306 | 27,930 |
| 600,000 | 6,618 | 41,180 |
| 1,000,000 | 28,490 | 103,137 |
| 2,000,000 | 152,510 | 323,806 |
| 3,000,000 | 351,697 | 586,000 |
| 6,000,000 | 1,094,383 | 1,526,889 |
People in GROUP I. (under 21 years of age) will continue with the scale of bonuses that had been applied until now, that is, this contingent is not affected by the reform, as far as bonuses are concerned. Consequently, as of May 1, 2020, in inheritance in Catalonia two bonus scales will coexist, I and II, for GROUPS I and II respectively.
Second. – In those inheritances in which there is an individual company, or shares and participations of companies, in which the reduction for family business is applied – reduction of 95% of the value of the company – and in addition there is in the inheritance personal assets not affected by activity None, such as money, shares, real estate etc., will pay much more that part of the patrimony that does not affect the activity. That is, the coexistence of a family business with personal assets in a succession will be punished. This is given because the bonuses for this part of the inheritance have disappeared, it does not affect the activity. In other words, the reduction of 95% in the Inheritance Tax per family business is incompatible with the general bonus in quota that affects the rest of the patrimony. Or one or the other.We may find ourselves in inheritances that we cannot take advantage of the 95% reduction in the inheritance tax for family businesses, because in the inheritance there are other assets of greater value that could not enjoy the discount if the 95% reduction were agreed for the inheritance of the company, that is, it will be necessary to calculate and program very well what is most convenient from the tax point of view. Or, on the contrary, it will be convenient to apply the reduction for family business, even if with this we lose the bonus for the rest of the inheritance.In other words, it will be necessary to calculate and program very well what is most convenient from the tax point of view. Or, on the contrary, it will be convenient to apply the reduction for family business, even if with this we lose the bonus for the rest of the inheritance.In other words, it will be necessary to calculate and program very well what is most convenient from the tax point of view. Or, on the contrary, it will be convenient to apply the reduction for family business, even if with this we lose the bonus for the rest of the inheritance.
For this, it will be necessary to be very attentive to compliance with the requirements to be able to enjoy the 95% reduction in Inheritance Tax, since the Generalitat of Catalonia is taking extreme control of said compliance and, incidentally, it is showing that Many companies, despite their conviction that they are up to date, do not meet the requirements established in Catalan legislation, especially that relating to the formalities of the company with the manager (reliable employment contract, evidence at the General Meeting, in the memory, reflected in the payroll …) and above all, in terms of equity arising from the increase in idle financial assets (or real estate not allocated or for use by partners) that prevents “access” to the reduction or reduce the “Abast” of it.
In this sense, succession planning is going to be very important, since there are methods so that, with time, patrimonial movements can be made to avoid precisely this tax penalty on inheritances in which there is a family business. Thus, through programmed donations, we can achieve this dissociation between business assets and personal assets. Likewise, this effect would be achieved by separating in the succession, the recipient of the family business, from the rest of the assets, either other heirs or the children of the child who receives the family business, that is, the grandchildren.
Third. – Finally, the multiplying coefficients reappear, both in inheritances and in donations, depending on the pre-existing patrimony of the one who receives the inheritance or the one who receives the donation. That is, now we will have to take into account the assets of the heir and the donee when we have to calculate an inheritance or a donation. The pre-existing patrimony only affects the relatives of GROUP I and II.
This has caused inheritance to be less convenient than donation. Until now, the inflection point was close to 2 M euros (from this figure it was more cost-effective to donate than to inherit) and as of the April 2.020 reform, this inflection point has dropped to the figure of 500,000 euros.
Therefore, from now on we will find scenarios in which it will be much more convenient to make donations while living than to wait for death, in such a way that with a good programming and with a little time, the savings could be very considerable in inheritance tax.
And when making donations, we must not forget the possibility of reserving the right to dispose, to make conditional donations and, above all, to specify the nature of the donation.