Significant Changes in the Inheritance and Donation Tax in the Valencian Community

The tax regulations in the Valencian Community have undergone notable modifications in relation to the inheritance and gift tax. Substantial changes have been introduced that affect both donors and heirs. These transformations, published on November 23, 2023, but with retroactive entry into force as of May 28, 2023, directly impact the applicable reductions and bonuses, seeking to simplify and make certain aspects of the process more flexible.

Donations: Expansion of Relationship Reductions

One of the most notable changes focuses on donations, with significant adjustments in the application of the kinship reduction of up to 100,000 euros. Previously, this reduction was limited to donations from parent to children. The reduction now extends to donations between spouses.

In addition, the requirement of a pre-existing estate for the donee (who receives the donation) is eliminated. And the reduction in donations from grandparents to grandchildren is allowed to be applied, even if the parents are still present. This eliminates the requirement that the parents have died in order to apply this reduction.

This new scenario simplifies the process and provides more flexibility to families by eliminating previous barriers that limited the application of these reductions.

Bonuses in the Final Donation Tax Fee

Another crucial modification affects the bonuses in the tax rate in favour of the person who receives the donation. A 99% bonus is reintroduced for donees who are spouses, parents, children, grandparents, or grandchildren of the donor. This measure seeks to encourage asset transfers within the close family nucleus, facilitating the transition of assets and properties from generation to generation.

It is essential to highlight that, to benefit from these reductions and bonuses in the Donation Tax, donations must be formalized in a public document before a Notary.

Inheritances: Increase in Bonus for Descendants, Ascendants and Spouses

Regarding inheritances, the tax rate bonus has been raised to 99% for heirs who are direct relatives (descendants, ascendants and spouses) of the deceased. This measure replaces the previous bonus which was 50% (or 75% in the case of descendants under 21 years of age). For its part, there has been no change in terms of bonuses for heirs who are not direct relatives, who cannot enjoy any bonus.

These changes seek to facilitate estate planning and promote the transmission of assets within the family, offering greater incentives and flexibility in the donation and inheritance process in the Valencian Community.

It is important to note, finally, that these modifications apply to situations caused since May 28, 2023. Therefore, for deaths and/or donations made after that date and that have already been settled, rectification may be requested. And, where appropriate, the refund of the excess amount paid due to the application of the new tax benefits.

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Laura Miralles Server and Maria Diego Leyda
Impley – Legal, Accounting & Tax Advice
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