Making gifts to spouses is no longer a tax worry.
In September, the Valencian government approved the draft bill reducing succession tax (Inheritance tax) and gift tax for certain beneficiaries
Reduction of Succession and Gift Tax in Valencia
By John Hayward
This article is published on: 29th November 2023
The reasons were that the taxes formed a very small part of the region’s revenue and many people were refusing inheritances as the tax worked out to be more than the overall benefit. Does the son or daughter in the UK really want to inherit the casita in the campo housing pigs and chickens?
We have had to wait for the bill to become law and this occurred on 24th November 2023 taking effect from 28th May 2023, the date that Carlos Mazón was elected president of the regional government of Valencia as leader of the Partido Popular. The backdating of this law is significant for beneficiaries who are dealing with deaths and inheritances since 28th May.
It is important to understand that the taxes for certain beneficiaries have been reduced but not abolished. The reduction in the tax has increased from 50% to 99% of the tax bill. This reduction applies to Class 1 and Class 2 beneficiaries and includes the proceeds of life insurance. These classes cover children, grandchildren, adoptees, parents, grandparents, adopters, and spouses. The €100,000 allowance per qualifying individual beneficiary (up to €156,000 for children under 21) will remain.
Suggesting that it is a better time to die now may sound a little crass but it would appear to be a very good time to make gifts, taking advantage of the gift tax reduction and mitigate future succession tax. Another important aspect to gifts is that they need to be formally documented.
Over the last 10 years, Valencia has changed the basis of succession and gift tax on a number of occasions. There was a 99% reduction before. This fell to 75%, then 50%, and is now back up to 99%. Therefore, it is reasonable to suggest that there could be changes to the law again.
Strangely, before these revisions, spouses in the Valencian Community did not receive an allowance on gifts and this caused a problem when planning financial structures. Spouses in the Valencian Community are now eligible for the allowance of €100,000 on gifts along with the 99% reduction on the tax on any excess. In my case, the “What’s hers is hers and what’s mine is hers” principle still applies.
Contact me to discuss ways of reducing the tax liability for those you care about no matter what the law is at the time.