THE inheritance tax is usually at the center of debate. Despite being a state-owned tax, it is transferred to the autonomous communities, so that each region is free to establish its own deductions and reductions. That way, in identical cases, it is not the same to inherit in Madrid, Valencia or Extremadura. In today’s article we will analyze the main inheritance tax reductions in the Valencia Community. To do so, we will refer to Law 13/1997 of 23 December 1997.
Reduction for degree of kinship
Depending on the relationship of kinship between the deceased and the heirs, the reductions to apply differ:
– Descendants under 21 years of age will have a reduction of €100,000 plus an additional €8,000 for each year under 21. However, there is a limit of €156,000. Meaning that a child of 17 years old would have a reduction of €132,000. The initial €100,000 plus another €32,000.
– Sons or daughters over 21 and other descendants, the spouse, and parents (and other ascendants) will have a reduction of a maximum of €100,000.
Reduction for disability
People with some type of physical or sensory disability will also be eligible for a reduction, depending on the degree of their disability. When it is higher than 33 per cent, the reduction will be up to €120,000. In cases where it is greater than 65 per cent (or the disability is of a mental nature, and higher than 33 per cent), the reduction will be up to €240,000.
This reduction is, at the same time, compatible with the reduction for degree of kinship reduction analysed above.
Reduction for the acquisition of companies or shares in certain entities
When inheriting an individual company, family business, shares in certain entities or agricultural holdings, a reduction of 99 per cent can be applied. For this to happen, the heirs need to be the spouse, children (or descendants), parents (or ascendants), siblings, uncles/aunts or nephews/nieces. Also, it is essential that the business is maintained during the five years following the inheritance.
Please note that, depending on the type of company (family business, agricultural exploitations, individual company) it will be necessary to fulfil specific additional requirements for each one of them.
Reduction for the purchase of a habitual residence
This is one of the most applied reductions in inheritances. When the habitual residence of the deceased is inherited, a reduction of 95 per cent of its value can be applied by each heir. However, a limit of €150,000 is set. This means that, for example, if the value of the property is €300,000, the maximum that can be deducted per heir would be €150,000. This reduction applies to widows or widowers, children, parents (ascendants and descendants), or siblings over 65 years of age who have lived with the deceased during the two years prior to their death.
It is very important to bear in mind that this reduction is conditional on the heirs maintaining the home for the following five years, and not passing it on to a third party.
Reduction for the transfer of Valencian cultural heritage assets
If a series of requirements are met, a reduction of up to 95 per cent can be applied when inheriting assets registered in the General Register of Assets of Cultural Interest or in the General Inventory of Cultural Heritage, etc.
Conclusions
At White-Baos we are experts in inheritance matters. If a relative has passed away, do not hesitate to contact us before submitting you tax declaration to the Tax Agency. We will study your case and offer you expert advice on the main inheritance tax reductions applicable in each case.
The information provided in this article is not intended to be legal advice, it simply conveys information related to legal issues.
Carlos Baos (Lawyer)
White & Baos.
Tel: +34 966 426 185
E-mail: info@white-baos.com
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