IMPUESTO DE SUCESIONES Y DONACIONES

TAX ON INHERITANCE AND GIFTS

There was a  gradual trend towards the elimination of the ISD, and now there are many Regional Governments that have removed it, mainly in regard to direct heirs.

Transferred to the Regional Governments, income belongs to the one of residence of the deceased, both in procurement due to death and in the amounts received by the beneficiaries of life insurance.
- An estate tax, over the mass of goods and assets and not on their yield.
- It is a direct  and subjective tax, taking into account the personal circumstances of kinship, age, current health and wealth of the taxpayer.

1. PARTITION OF INHERITANCE
In succession because of death, whatever partitions and adjudications from the interested parties, it is considered for tax purposes as having been made with strict equality and in accordance with the rules governing the succession, whether or not the property are subject to tax by  the territory or any other cause.

Consequently, increases in value resulting verification of values is apportioned among the several purchasers or heirs.
This rule does not apply in two situations:
- When the testator himself who adjudicated the property to the different heirs  in his will.
- When goods are allocated in a different concept than  inheritance( i.e. legate)

Declared excess of value adjudicated.

The persons concerned of a partition can agree to  allocate to each heir property so that their values do not conform to the value of inherited shares(in other words, different values to each heir). In these cases must necessarily be over-allocation in relation to any heir, which must be compensated with what other heir received less.

These declared excesses of allocation are subject to tax  ITP-AJD by the concept onerous property transfer mode, to be paid by the heir who receives the excess of value and applying, over the verified value of the excess, the tax rate that corresponds to the nature movable or immovable of the  property of the asset allocated.

However they are excluded from this tax-but maybe taxed by the concept AJD- of the following cases:
a) The legacy subject to reduction if it consists in an estate that does not support a convenient division (Article 821 of the Civil Code).
b) The improvement particularized in specific thing whose value exceeds the third of improvement -tercio de mejora- and the legal share that corresponds to improved, that stays with the thing, paying the difference in cash to the other interested parties (Article 829 of the Civil Code).
c) The parent, wanting to keep undivided a farm, industry or manufacturing, attributes on the same  testament one of their children, assuming that the the difference of value shall be paid in cash to the  other legitimate (Article 1056 Civil Code).

d) indivisible assets or goods, or that would lose  much value because of the division, may be awarded to one of the heirs, provided he paid the other the excess in cash money (Article 1062 Civil Code).

2. ACCRUAL AND PRESCRIPTION
The tax is payable since the day of death of the deceased, or becomes final the declaration of death.

Where the acquisition of property or rights are suspended by the existence of a condition, term or trust, or any other limitations, it is understood that the acquisition takes place the day that disappear such limitations. The value of goods and applicable tax rate takes as reference that same day.
For the prescription must take into account the rules established by LGT (ie 4-year lapse since the day the deadline for tax payments that  is 6 months of the death of the deceased, then prescribe the payment of tax at 4 years and 6 months after the death).

3. TAX MANAGEMENT
The Regions have the power to regulate within its territory the management of ISD. For the purposes of settlement of the ISD, taxpayers can opt for the submission of documents to the competent tax authority, which would proceed to the liquidation of the tax or alternatively proceed to the self- assessment of the tax

4. DEADLINE
In acquisitions mortis-causa and insurance contracts for the event of death, the period is six months after the death of the testator or the insured.

This period is extendable for another period equal to six months, at the request of the heirs, executor or administrator of the estate. This request must be submitted within the first five months of the original term. The extension is meant tacitly granted if a month goes unanswered by the administration. The granting of the extension involves the payment of default interest. In case of refusal to extend the term refers ¬ tion has expanded in the days elapsed from the day following the filing of the application and the submission of refusal agreement. If filing this extension is made after six months indicated, also have to pay interest on late payments.

5. Liquidation classes
a) provisional liquidation. They are practiced by the liquidator without having all the necessary data, base in the information provided by the interested heir.

This type of liquidation produces interruptive effects over the prescription and means that has been made as an account payment for the definitive liquidation.

b) final liquidation. When the liquidator has practiced full check of the estate of the deceased, or the time to do it run out.

c) partial liquidation. In the case of acquisition by reason of death, taxpayers may request partial liquidation relating to specific assets. This allows the heirs to dispose of real practice before the final liquidation of the tax.
The application must be submitted within the deadline, in writing in duplicate in which relate the goods concerned, its value and the situation they are.

d) additional liquidation. when having previously  made provisional liquidation the verification finds out increase of the tax base value,  or when it establishes the existence of material errors had led to a Deduction in the amount entered .

e) Self-assessment.  This system requires the inclusion in the declaration of the corresponding settlement: the value of all property and rights conveyed, of all the buyers interested in the estate or insurance and compliance.

Two models:
650, ordinary statement.
651, simplified reporting.

6. TAX PAYMENT

There are several reasons to delay payment, the main one is that there is insufficient money for such payment until they sell some assets, but in any case the most common cause is the deferment period of up to one year, access to any interested party and with the following requirements:
a) It is requested before the expiry of the statutory period of payment.
b) That there is no among the decedent's assets cash or property easily vendible,  sufficient for the payment of dues paid.

It should be noted that granting carry the obligation to pay default interest applicable on the date to begin accrual basis.
After this delay may agree with the same conditions and compliance with identical requirements, the division of payment in seven successive semi-annual installments, from the notification of award of the splitment.

7. TAX SETTLEMENT
+ Value of goods + value of the additions+ value of the household furniture  - deductible charges- - deductible Debts -- Deductible expenses = Taxable income -- Reductions
= Taxable income x Rate (the scale is approved by each Autonomous Community)
- Full feex coefficient (set to two factors: kinship and heritage)- Tax Fee
- Deductions and allowances= Amount to pay

8. SOME SPECIAL RULES OF SETTLEMENT
A. Taxation of beneficial interest
1. Temporary usufruct are valued at 2% of the total value of goods for each period of one year not exceeding 70%. No fractions of time under  one year not are considered-

2. Life right of Usufruct  are valued at 70 %of the total value of goods, for the usufructuary under 20 years, with increasing age is decreased by 1 100 less per year, with a minimum of 10 per 100 ( age 89).
3. Bare ownership: is the difference between the total value of the property and the usufruct. In successive usufruct the value of the bare ownership is calculated taking into account the enjoyment of the highest percentage, and the extinction of the usufruct the bare owner will pay for the increase in value as the bare ownership experience and so on to extinguish the other usufruct.
4. The value of the real rights of use and habitation will be the result of applying to 75 per 100 valuation of property on which they were imposed, the rules for the valuation of temporary or lifetime usufruct, as appropriate.

B. Substitutions:

Vulgar Substitution: Fiscally it is understood that the replacement inherits the deceased to a rate as a kinship to him and taking into account existing heritage (In the case of the substituted renounce the inheritance, the estate is to compute the resigning when you have more than one designated beneficiary).

- The trusts will be required in the institution and imposed upon each replacement taking into account the established pre-existing assets or substitute, and degree of kinship with the deceased individual, well-known to the trustee and the trustees, except the last, as mere usufruct, unless he could dispose of property by acts inter vivos or mortis causa, in which case will be settled by the full domain.

C. The municipal capital gain, which in the case of inheritance is extended from the normal term of  30 days up  to 6 months (as ISD) and applies reduced rate.