TAX CHANGES IN THE COMMUNITY OF MADRID FOR 2019

TAX CHANGES IN THE COMMUNITY OF MADRID FOR 2019

As it had been announced in the press, with the typical bombast of political marketing, Law 6/2018 of December 19 of the Community of Madrid, introduces a series of tax modifications in the taxes that have been transferred.

We are going to refer in this entry to the modifications that affect the taxes most linked to notarial activity, such as inheritance and donations, and property transfers and documented legal acts.

A.- TAX MODIFICATIONS IN THE CASE OF CASH DONATIONS.

The general scheme for cash donations, the content of which can be consulted by clicking here, is completed with the provisions of the new article 22 bis, of Legislative Decree 1/2010, of October 21, which introduces a reduction in the tax base of the donation tax in certain cases and with certain requirements, which are the following:

1.- They must be monetary donations, in which the amount donated is destined to:

1.1.- The acquisition of the principal residence of the donee.

1.2.- The acquisition of shares or participations, as a result of agreements to establish or increase the capital of companies.

1.3.- The acquisition of goods, services and rights that affect the development of an individual company or a professional business of the donee.

2.- The donee must be either a subject of group I or II, that is, a descendant, spouse or ascendant of the donor (ancestors and descendants by adoption are included), or a second degree collateral relative by consanguinity of the donor ie brother.

3.- The benefit is articulated as a reduction in the tax base of the 100% of the amounts donated with a maximum limit of 250,000 euros. All donations made by the same donor to the same recipient during the previous three-year period are accumulated, if they are used for the indicated purposes.

4.- Donations must be made in a public document and the destination of the amounts donated must be stated.

5.- Deadlines.  Between the moment of the donation and the destination of the money for the indicated purposes, no more than one year should elapse. In the event of non-compliance, a supplementary statement must be submitted, without the application of the reduction, including late-payment interest. The same effects will occur if the acquired home is not inhabited within a period of 12 months from the acquisition.

How does this tax benefit work?

I want to focus on it, as it departs from the traditional way in which tax benefits have been used in Madrid.

Explaining with an example, we would have that if some parents donate to their child the amount of 120,000 euros, for any of the expressed purposes. The tax base, which is made up of the value of the donated good, will be reduced by the same amount, thus setting the taxable base at 0 euros. In this way there would be no taxation.

In any case, since the reduction in the base and the bonus in the 99% fee are compatible (which we remember applies to donations between ascendants, spouses and descendants and without the obligation of destination of the donated), these modifications are really interesting in case of donation to collaterals.

We give an example of how the donation tax of 196,100 would act, with three variants: the general rule, the reduction in the base and the quota bonus.

 

GENERAL SCHEME WITH REDUCTIONS WITH BONUSES
Actual value of assets and rights 196.100,00 € 196.100,00 € 196.100,00 €
Deductible charges and debts
TAXABLE BASE 196.100,00 € 196.100,00 € 196.100,00 €
Reduction 196.100,00 €
Reduction
LIQUIDABLE BASE 196.100,00 € 0,00 € 196.100,00 €
RATE (average type) 15,70% 15,70%
FULL FEE 30.771,21 € 30.771,21 €
MULTIPLIER COEFFICIENT 1,00 1,00
TAX RATE 30.771,21 € 30.771,21 €
QUOTA BONUS (99%) 30.463,50 €
TOTAL TO ENTER 30.771,21 € 0,00 € 307,71 €

B.- TAX MODIFICATIONS IN THE CASE OF INHERITANCE OF COLLATERAL.

This modification was widely publicized in the press, but in my opinion it is stingy, and to demonstrate it, the Community Ministers of Justice and Finance are hereby invited to come to my office and see practical examples of injustices and inefficiencies manifestations that occur every day.

What has been introduced by Law 6/2018 of December 19 of the Community of Madrid, is a bonus in the tax quota of a 15% for the case of acquisition by second degree collaterals (brothers); and a 10% for the case of acquisition by third-degree collaterals (uncles and nephews), conditional on a tax declaration being made within a voluntary term or after the term but without a requirement from the administration.

He said that the reform is very stingy, since the reduction in the existing tax base is very small (8,000 euros), which can be extended up to 123,000 euros in the case of acquisition of the deceased person's habitual residence, provided that the successors in title are a relative. collateral over the age of sixty-five who had lived with the deceased during the two years prior to death, and because the collaterals have at least a multiplier coefficient of 1.5882.

In addition, for reasons of consistency, ascendants and descendants by affinity should be included as bonus beneficiaries.

Let's give an example. Inheritance of 250,000 euros, consisting of a house of 250,000 euros, owned by the deceased, where he lived with the heir over 65 years of age. As we have said, the amount of the bonus depends on the relationship.

GENERAL SCHEME BONUS 15% BONUS 10%
Actual value of assets and rights 250.000,00 € 250.000,00 € 250000
Deductible charges and debts
TAXABLE BASE 250.000,00 € 250.000,00 € 250.000,00 €
kinship reduction 8.000,00€ 8.000,00€ 8.000,00 €
housing reduction 123.000,00 123.000,00€ 123.000,00 €
LIQUIDABLE BASE 119.000,00 € 119.000,00 € 119.000,00 €
RATE (average type) 13,00% 13,00% 13,00%
FULL FEE 15.475,73 € 15.475,73 € 15.475,73 €
MULTIPLIER COEFFICIENT 1,5882 1,5882 1,5882
TAX RATE 24.578,55 € 24.578,55 € 24.578,55 €
QUOTA BONUS (15% or 10%) 3.686,78 € 2.457,86 €
TOTAL TO ENTER 24.578,55 € 20.891,77 € 22.120,70 €

We see that the reduction ranges between 3,686.78 euros and 2,457.86 euros. And if the reduction for housing could not be applied, the amounts that should be paid could be considered outrageous.

I believe that for reasons of justice and from experience of how inheritances between collaterals are produced, as is the frequent case of very old siblings, who live together and provide mutual assistance, due to the fear that residences produce, a reduction should be added in the tax base, linked to the age of the heirs.  

C.- DISCOUNTS FOR THE ACQUISITION OF THE USUAL HOME.

1.- In the cases of acquisition of habitual residence secondhandAs long as it does not exceed the value of 250,000 euros, the property transfer tax is subsidized by 10%.

Therefore, instead of paying 6%, 5.4% will be paid, that is, 13,500 euros instead of 15,000 euros,

2.- In cases of acquisition of habitual residence first hand, as long as it does not exceed the value of 250,000 euros, the documented legal acts tax is subsidized by 10%.

Therefore, in addition to paying VAT to 10%, instead of paying 0.75%, 0.675% will be paid, that is, 1687.50 euros instead of 1,875 euros,

These benefits would be lost if the acquired home is not inhabited within 12 months from the acquisition.

d. DISCOUNTS FOR THE ACQUISITION OF THE USUAL HOME BY LARGE FAMILIES.

It is added to a bonus of 95% of the documented legal acts tax fee in the case of the acquisition of habitual residence first hand, without limiting the amount of the price.

This bonus is added to the reduced rate of 4% in the property transfer tax, which already existed in the case of home acquisition of second hand.

 

 

 

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