When the holder of the leasing activity goes into retirement, the fact of receiving this benefit makes it impossible to carry out the business personally and directly, according to the General Treasury of the Social Security; this prevents the application of the exemption provided for goods and rights necessary for the exercise of an economic activity.
Exemption from goods and duties necessary for the pursuit of an economic activity
A person, holder of an activity of leasing premises for companies, has for the development of this activity a person hired full-time.
Faced with the doubt about the taxation of his situation, he raises a query before the General Directorate of Taxes (DGT) raising the compatibility of his retirement, without developing the activity personally and directly, with the exemption in the Wealth Tax (IP).
The Administration responds by reminding you that, in accordance with the regulations of the Wealth Tax, in the event of the exercise of economic activities by natural persons, it is an inexcusable condition to enjoy the right to exemption, that they constitute their main source of income and that, in addition, the activity is exercised in a habitual, personal and direct way by the taxable person (LIP art.4.Ocho.1).
The qualification as economic of the activity of leasing of real estate, requires to have a person hired for the management of the activity, with an employment contract and full-time. As this requirement currently exists, exemption from property tax would be appropriate if the aforementioned requirements are met.
Once this person passes into the situation of retirement although the activity carried out by the taxable person, as inherent in the ownership of the business; would be compatible with the receipt of the retirement pension, the fact of receiving it prevents the personal and direct carrying of the business, as reported by the General Treasury of the Social Security.
Consequently and given that the exemption in the Wealth Tax (condition sine qua non for access to the reduction in inheritance tax), requires the exercise of the activity in a habitual, personal and direct manner; the exemption in the Wealth Tax and, therefore, neither the reduction in the Inheritance and Donations Tax (ISD) in the event of the death of the consultant.
The property and rights of natural persons necessary for the development of business or professional activity are exempt. To this end, the activity must constitute the main source of income of the taxable person, and that the latter carries it out in a habitual, personal and direct manner (individual entrepreneur).
Property and rights common to the two members of the marriageare also exempt when they are used in the development of the business or professional activity of either of the spouses, provided that the aforementioned requirements are met.
In applying the exemption, the following rulesmust be taken into account:
- a) Business or professional activities are considered those that have the nature of an economic activity in accordance with the rules of personal income tax. In particular, in relation to the leasing of real estate, when verifying the condition that at least one person employed with a full-time employment contract is used for the organisation of the activity.
- b) Assets and rights affected are those that, regardless of their ownership (exclusive to the taxable person or shared with their spouse), are used for the purposes of the activity according to the rules of personal income tax.
- c) The value of the goods and rights is determined in accordance with the rules of the Wealth Tax. The debts of the activity reduce that value, but cannot be re-computed to determine the tax base of the tax.
The requirements and conditions for the exemption to apply must be referred to the time when the accrual of this tax occurs.
When the taxable person carries out more than one activity under the conditions indicated, the exemption covers all the goods and rights affected by them, and in the calculation of the main source of income, the joint income of those activities must be taken into account. (LIP art.4.Eight.1; RD 1704/1999 art.1 to 3 and 7 to 9)
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