This article comments a recent Spanish Supreme Court ruling on the personal assets valuation in the intheritance tax. The personal assets are only the ones of personal use of the deceased, which are not specifically excluded by law such as cars, bikes, boats, high value assets, which have no a high value and which are not provide specific income.
This articles comments on a very recent and disruptive ruling of the Spanish Supreme Court on the valuation of the personal assets for inheritance tax purposes.
The ruling
On May the 19th 2020 the Spanish Supreme Court made a ruling which you can read here in Spanish which analyses the concept of personal assets with regards to the inheritance tax.
The previous situation
The inheritance tax regulations said that in all inheritance there are some normal personal assets of the deceased and as this could be very difficult to valuate the law says they are worth 3% of the full estate unless the beneficiaries show to the Tax Office that they are worth more or less than the 3%.
So the Tax Office always added a 3% of the estate value as a personal assets of the deceased. And that was it and whatever the beneficiaries said.
The ruling newness
The ruling makes a new interpretation of the personal assets concept and the evidence of its value in several ways. The legal points are quite subtile in my opinion so I will show basically the conclusions of the ruling and I will summarize brutally.
There is no specific concept of personal assets in the inheritance tax regulations (but it does exist in the Wealth tax regulations though) so we have to take the general legal concept and the usual concept according to the current social standards. This is, the normal main residence assets (clothes, linen, furniture, etc.)
So the personal assets refers to limited assets and not to the whole estate. The current regulations take into account the value of the whole estate and assume that the 3% is the personal assets value and this could lead to unjust situations and taxation of the same things twice. Also, it could be against the principle of taxation on economic capacity because the value of the whole 3% of the estate is taxed as personal assets value despite the real value of them.
The ruling conclusions
- The personal assets are limited to the main residence or to the personal use of the deceased.
- So the assumption of the personal value assets at the 3% of the whole estate value is not correct. The 3% should refer only to the specific personal assets limited to the main residence or personal use.
- Company shares are not personal assets by nature (this was the case discussed in the ruling).
- The tax payer can always show a different value of the personal assets different than the assumption of the 3%.
So what do we do from now on?
It depends.
The Tax Office will do as usual and they will keep adding a 3% of the total estate value as personal assets value.
So it is advisable to look into each individual case to check if is worthy to fight this valuation or not. It is a matter of cost and benefit balance.
If the situation is clear and it is worthy to make some effort to reduce the value of the personal assets we can try.
It depends on each case in my opinion.
Besides, it seems that the matter is not definitely closed as the ruling was not unanimous and one third of he magistrates disagree on the reasons of the ruling but not on the outcome of that specific case.
Conclusion
With the Tax Office always be cautious. I advise to assess carefully each individual situation with a tax expert.
Thank you
Thank you for your time and attention and I hope this information is of use.
Warning
Please, note that this is general information. This is not specific legal advice. It is advisable to seek legal advice for any specific legal issue.
And remember, take care and stay at home.