The donation of the bare ownership of some social participations, raises questions about which should be the regional administration to which it corresponds to tax depending on the qualification given to this transfer of shares, and the dilemma that reductions should be applied at the time of acquisition of the full domain subsequent by the extinction of the usufruct, the one that exists at the time of acquiring full ownership or the one that existed at the time of the transfer of the bare property.
In the donation of the bare ownership of shares of a commercial entity, the first point to find out is which public administration is competent and if there is any type of reduction applicable to the donation, taking into account that the competence over the gift and inheritance tax was transferred these, so the reduction of the same will depend on which of them is competent in the taxation of the transmission of donations.
Determination of the Autonomous Community where the tax will be taxed.
According to article 32 of Law 22/2009, of December 18, which regulates the financing system of the Autonomous Communities of Common Regime and Cities with Statute of Autonomy and modifies certain tax rules (BOE of December 19, 2009), the transfer to the Autonomous Communities of the income of the Inheritance tax and donations of the taxpayers resident in Spain is provided, and in its point b) it says that “In the case of the tax levied on donations of immovable property, when these are located in the territory of that Autonomous Community … For the purposes of the provisions of this letter, the transfers free of charge of the securities referred to in article 108 of Law 24/1988, of July 28, on the Securities Market will be considered donations of real estate… c) In the case of the tax levied on donations of other property and rights, in the territory where the donee has his habitual residence on the date of accrual.”
The donation of shares will be taxed in the Autonomous Community whose territory the donee has his habitual residence, and must analyze the provisions of article 28.1.1º if the requirement of habitual residence in the Autonomous Community is met, which unless proven otherwise, it is understood that this happens with the residence of the taxpayer of a greater number of days that Autonomous Community in the 5 years immediately preceding.
On the donation of social participations, it should be noted that our regulations make an assessment of when it should be understood that the transfer of shares is made with the secondary objective of making a donation of real estate, in this case the place of residence of the donee would not be taken as a reference, but the Autonomous Community where the real estate that is understood to be donated should be taken.
To elucidate if we are in this case we will have to see if we are in some of the cases of article 314 of Royal Decree Law 4/2015, of October 23, which approves the Revised Text of the Securities Market Law (hereinafter, TRLMV), “2. The income from inheritance and gift tax of taxable persons resident in Spain is considered to have been produced in the territory of an Autonomous Community, according to the following connection points:
- a) In the case of the tax levied on acquisitions ”mortis causa” and the amounts received by the beneficiaries of life insurance that accumulate to the rest of the assets and rights that make up the hereditary portion of the beneficiary, in the territory where the deceased has his habitual residence at the date of accrual.
- b) In the case of the tax levied on donations of real estate, when they are located in the territory of that Autonomous Community.
For the purposes of the provisions of this letter, the transfers free of charge of the securities referred to in article 108 of Law 24/1988, of July 28, on the Securities Market will be considered donations of real estate.
- c) In the case of the tax levied on donations of other assets and rights, in the territory where the donee has his habitual residence on the date of accrual.
- When in a single document different goods or rights are donated by the same donor in favor of the same donee and by application of the connection points the yield must be understood to be produced in different Autonomous Communities, it will correspond to each of them the one that results from applying, to the value of the donors whose yield is attributed to it, the average rate which, according to its rules, would correspond to the value of all those transmitted.
- When it is appropriate to accumulate donations, the Autonomous Community will correspond to the income resulting from applying, to the value of the goods and rights currently transferred, the average rate that, according to its rules, would correspond to the value of all the accumulated ones.
For these purposes, all the accumulated assets and rights shall be understood as those from previous donations and those that are the subject of the current transfer.
- In the cases provided for in letters a) and c) of section 2 above, the regulations of the Autonomous Community in which the deceased or donee had his habitual residence will apply in accordance with the provisions of article 28.1.1º.b) of this Law”.
Donation of the bare ownership of the shares and subsequent acquisition of the full domain by extinction of the usufruct.
The question arises whether in life, a subject transmits the bare ownership of some social participations, and subsequently, either by intervivos act or mortis causa, the usufruct is extinguished, acquiring the knot owner the possession in full domain of the shares. Well, Article 26.c) of Law 29/1987 on inheritance and donations, answers this question, understanding that “in the extinction of the usufruct the tax will be required according to the title of constitution, applying the average effective rate of the tax corresponding to the dismemberment of the domain”.
In this way, when the full domain is consolidated, it must be taxed for the concept of donation, although the value of the shares must be taken into account at the time when the domain was dismembered, that is, when the bare property of the usufruct was separated in the first transfer, and not in the consolidation of both by the death of the usufructuary or subsequent transfer. All this will depend on the rates to be applied, using the average tax rate, taking into account the applicable reductions and bonuses, and the percentage of the tax that was not applied in the acquisition of the bare property.
In the cases of Autonomous Communities such as Madrid, which establish reductions of 95% in the transmission by donations, to understand if we should apply this reduction at the time of the dismemberment of the domain, we have to be in accordance with the provisions of article 51.2 of the Regulations on Inheritance and Donations Tax, approved by Royal Decree 1629/1991, of November 8, according to which, at the time of the dismemberment of the domain, the acquirer of the bare property is given liquidation for the value of the same with application of the average tax rate corresponding to the full value of the property, with application of the reductions by kinship. When the usufruct is extinguished, the owner will pay for this concept on the basis of the value attributed to it in its constitution, reduced, where appropriate, in the rest of the reductions when they had not been exhausted in the liquidation practiced by the acquisition of the bare property, and with application of the average effective rate of encumbrance calculated at the time.