Tax Relief in the Comunidad Valenciana

“Tax Relief in Valencia: Understanding the New Inheritance and Gift Tax Benefits”

We would like to inform you about the significant tax reforms introduced in the Community of Valencia, specifically regarding the Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones – ISD), effective retroactively from May 28, 2023.

The “Ley 6/2023, passed on November 22, 2023”, represents a substantial shift in taxation, aimed at easing the financial burden on families during inheritance and gift processes. Here are the key details:

99% Tax Relief on Certain Transactions: A remarkable 99% tax relief is now applicable to:

-Mortis causa acquisitions (inheritances) by relatives within groups I and II (Spouse, parents, adoptive parents, children or adoptees, grandchildren, and grandparents), as per Ley 29/1987.

-Inter vivos acquisitions (gifts) made to a spouse, parents, adopters, children (including adopted), grandchildren, and grandparents.

It’s crucial to note that these acquisitions must be executed in a public document and formalized within the tax declaration period. For cash gifts or those under Article 12 of the Ley 19/1991, the origin of the funds and the actual delivery method must be documented.

Additional Tax Reductions on Donations:

-For donations to children or adopted individuals under 21, a reduction of €100,000 plus €8,000 per year below 21, up to €156,000.

-For donations to children or adopted individuals 21 or older, spouses, parents, or adopters, a reduction of €100,000.

-For donations to grandparents, a reduction of €100,000.

-For donations to grandchildren 21 or older, a reduction of €100,000, plus €8,000 per year below 21, up to €156,000.

-For donations to individuals with physical or sensory disabilities of 65% or more, or mental disabilities of 33% or more, a reduction of €240,000.

-For donations to individuals with physical or sensory disabilities of 33% or more (including spouse, parents, adopters, children, adopted children, grandchildren, and grandparents), a reduction of €120,000.

As far as inheritances are concerned, these reductions were already applicable before this tax reform.

Retroactive Application: These measures apply retroactively to rights accrued since May 28, 2023, broadening the benefits to a wider range of taxpayers who previously had limited or no tax deductions.

This reform is expected to benefit up to 20,000 Valencians annually, who will no longer have to pay taxes on inheritances or gifts within the family.

We recommend our clients review any previous tax settlements under this tax, as the retroactive effect may entail adjustments or refunds. Please don’t hesitate to contact us for personalized advice on how these changes might impact your specific situation.

As always, it would be a pleasure to help you and advise you in the best way if you need any assistance related to this matter.