Giving up an inheritance to
avoid paying the property transfer tax
is not so simple. The different moments in which it can be renounced must be taken into account, which are key to establishing the particularities of its taxation, or to avoid it.
From the blog of AYCE LABORYTAX we clear your doubts, giving you all the information so that you know everything you need to know to assume the role of heir,as well as the different moments in which to be able to renounce an inheritance.
What are Estate Taxes?
The property transfer tax is a state tax that is imposed on the autonomous communities, so that the taxpayer’s tax obligations will depend on the degree of kinship they had with the deceased deceased.
Thus, four degrees of kinship should be highlighted:
- Parents, children, spouses, son-in-law/daughter-in-law and in-laws.
- Grandparents, grandchildren, siblings and brothers-in-law.
- Great-grandparents, great-grandchildren, uncles and nephews.
- Cousins and great uncles.
Transfer and Inheritance Tax: What should you know?
There are two different times when an heir can meet after having received an inheritance.
- The first is that you have the character of taxpayer in front of the Tax Agency and, therefore, you must pay the tax on patrimonial transfers.
- The second is that he cannot afford these property taxes, thus having to renounce his inheritance.
The formulas available from that moment on will be detailed below. However, it should be noted that the simplest renunciation of inheritance is “repudiation”,and that it does not imply a favoring of a third party by the heir.
Thus, for tax purposes you will never have disposed of such assets and therefore, you will be exempt from paying tax obligations.
In this way, the situation changes if there is a renunciation of the inheritance favoring others,since it will be as if the initial heir had disposed of said assets. This transfer of rights will be, before the Tax Agency, a donation, so it will be taxed as such.
The form and time in which the renunciation of that legitimate inheritance occurs is decisive in order to pay or be exempt from property taxes.
The different possible situations are set out below:
Do I have to pay this tax if I give up an inheritance?
To answer this question, there are several situations to consider:
Assumption #1: Waiver before inheritance tax statute of limitations
If the renunciation of the inheritance has been carried out prior to the statute of limitations. inheritance and gift tax,
the property transfer tax will not haveto be paid, in case no one has been named as favored since the resignation has occurred.
However, those who were in the situation of heirs later, must contribute the amount of property taxes.
It should be noted that, in order to renounce the inheritance effectively, it will have to be done expressly and publicly before a notary,or by judicial means through a writing, without in any case, partial waivers being admitted.
Starting from this point, it is possible to make the waiver of translational inheritance or the simple renunciation, in accordance with the regulations of the tax that regulate inheritance and donations.
Assumption #2: Renunciation of inheritance in favor of another heir
Another case of translational waiver is the one that occurs expressly in favor of another heir, since the tax obligations are doubled in this case.
Both persons will be subject to the tax on property transfers. The one who is going to renounce the inheritance must pay his patrimonial taxes by way of inheritance, as well as the one who benefits from the inheritance in case there was no price in the favor.
However, if there is one, your taxes on property transfers will be made by way of property transfers.
Assumption #3: Estate taxes have already expired
On the other hand, if the renunciation of the inheritance occurs when the estate taxes have been prescribed, such taxes will not be paid if the inheritance is accepted.
Neither will the person who resigns have to do so since, for tax purposes, it will be understood that a donation has been made to those who are finally favored. These, on the other hand, must make a taxation of the tax on patrimonial transmissions by way of donations.
In conclusion, we can say that in recent years the number of heirs who renounce their inheritance has increased because they cannot afford the property transfer tax. As indicated in the previous paragraphs, the moment in which such resignation occurs will be key.