We have significant developments to share regarding the Inheritance and Gift Tax regulations, with effects on taxable events from May 28, 2023. These changes are poised to make a substantial impact on your financial planning endeavors. Let’s delve into the details:
A) Enhancements in Reductions for Inter Vivos Transfers
- Reductions Based on Familial Relationships:
- For acquisitions by children or adopted children under 21 years old, the previous requirement of a maximum pre-existing patrimony of 600,000 euros has been eliminated.
- In the case of acquisitions by children or adopted children aged 21 or older, as well as parents or adopters, the condition relating to the pre-existing patrimony has been removed. Furthermore, the reduction now extends to spouses.
- In acquisitions by grandchildren, the need for a pre-existing patrimony and the condition that the parent, who was the donor’s child, had to have passed away prior to the tax event have both been eliminated.
- For acquisitions by grandparents, the requirement to meet specific criteria has been eliminated.
Additionally, restrictions on the applicability of these reductions within ten years prior to the tax event have been lifted.
- Reductions for Individuals with Disabilities: The scope of the reduction applicable to parents, adopters, children, or adopted children with disabilities has been extended to spouses. Additionally, for grandchildren and grandparents with disabilities, specific qualification requirements have been waived.
B) Significant Bonuses on Tax Amounts
- It has been set a bonus of 99% for inheritances made by relatives categorized under Groups I and II of kinship, previously at 75% for Group I and 50% for Group II.
- A 99% bonus has been added for live transfers executed by spouses, parents, adopters, children, adopted children, grandchildren, and grandparents. This bonus is applicable as long as the transfer is formalized in a public document or within the tax declaration period. Special provisions apply when the gift consists of cash or any of the assets listed in the LIP (LIP art.12).
- The bonus for acquisitions by individuals with disabilities, whether physical, sensory (with a degree of 65% or higher), or psychological (with a degree of 33% or higher), has been raised to 99% from the previous 75%. Furthermore, this bonus now extends to both inheritances and live transfers.
These revisions are designed to simplify and streamline the process for all stakeholders involved.