The tax regulations in the Valencian Community have been modified in relation to the inheritance and gift tax. Substantial changes have been introduced that affect both donors and heirs. These transformations has been published on 23th November 2023. Despite of it, the good new is that they can be applied from 28th May 2023. The modifications has directly impact on the applicable reductions and bonuses, seeking to simplify and make certain aspects of the process more flexible.
Donations: Expansion of Relationship Reductions
One of the most notable changes focuses on donations. Previously, this reduction was limited to donations from father to son. The reduction now extends to donations between spouses. That means that 100.000 euros will be tax free within these groups.
In addition, the donee can have preexisting wealth. In the previous law, the donee won’t benefit of the reductions if he had a previous wealth that exceed of certain amount . Donations from grandparents to granchildren are now allowed.
This new scenario simplifies the process and provides more flexibility. Previous barriers that limited the application of these reductions has been eliminated.
Bonuses in the Final Donation Tax Fee
Another crucial modification affects the bonuses in the tax rate in favor of the person who receives the donation. A 99% bonus is reintroduced for donees who are spouses, parents, children, grandparents, or grandchildren of the donor. This measure seeks to encourage asset transfers within the close family nucleus. This also facilitates the transition of assets and properties from generation to generation.
It is essential to highlight that, to benefit from these reductions and bonuses in the Donation Tax, donations must be formalized in a public document before a Notary.
Inheritances: Increase in Bonus for Descendants, Ascendants and Spouses
Regarding inheritances, the tax rate bonus has been raised to 99% for heirs. But not all the heirs will benefit from the reduction. Only those who are direct relatives (descendants, ascendants and spouses) of the deceased get the benefits. This measure replaces the previous bonus which was 50% (or 75% in the case of descendants under 21 years of age). Bonus are only for relatives. Those who receives a gift from people with no family link don’t have any right to receive the reductions.
These changes seek to facilitate estate planning and promote the transmission of assets within the family, offering greater incentives and flexibility in the donation and inheritance process in the Valencian Community.
It is important to note that the new law applies from the 28th of May 2023. Tax forms submitted for deaths and/or donations made after that date can be rectified. We are sure than you can get a rebate for those periods if you have paid any Inheritance tax due to the application of the new tax benefits.