Modification to the Inheritance Tax

Modification to the Inheritance Tax in the Valencian Region. What can we expect? Inheritance. Gifts. Lower taxes. Reduction of taxes. Tax rebates.  Legal advice.

On the 28th of May of 2023, municipal and autonomic elections were held in Spain, resulting in a new regional government in the Valencian Community. Among the first measures of the new president of the Generalitat Valenciana is a substantial modification to the Inheritance Tax and Gift tax. What can we expect from this upcoming change in the law? Do we know when will this reform come into force? We answer these and other questions in this week’s article.  

Inheritance Tax in the Valencian Community: How does it work?

In the Valencian community for many years, almost no Inheritance and Gift Tax was paid. Until 2013, this tax had a 99% reduction. In other words, receiving an inheritance or making a gift hardly had any impact on the pockets of citizens (out of every 100€ to be paid to the taxman, only 1€ was paid). However, from 2013 onwards, the Valencian Region suppressed this reduction and became one of the most expensive regions in Spain to inherit or receive a gift. Until now.

What does the modification to the Inheritance Tax and Gift Tax consist of?

The change of law 13/1997 that the new government intends to approve is very simple: to re-apply the rebate of 99% of the tax liability. Both in mortis causa acquisitions (inheritances) and inter vivos acquisitions (gifts/donations). Although it is not official yet, this tax rebate is expected to apply only to close family members: parents, children, spouses (and in the case of gifts, also grandparents and grandchildren).

When will the modification to the Inheritance Tax and Gift Tax be finally approved?

At the beginning of August, the draft bill was published in the Official Gazette of the Generalitat Valenciana (DOGV). This marked the beginning of the public consultation period of 15 days during which any citizen could present allegations. The Valencia government is currently studying the allegations. The next step will be to present the law to the Consell of the Generalitat which, subsequently, will send the law to the Valencian Parliament, where it will be definitively approved.

Conclusions.

The modification to the Inheritance Tax promises to place the Valencian Community as one of the regions in Spain with the lowest tax burden in inheritances and gifts.

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