One of the first entries in this blog began with the question: What is the value of a farm that must be put in a deed?
The question has not ceased to be topical, and as we said then, although the laws regulating property transfer taxes and inheritance and donation taxes indicate that what must be put is the real value, the determination of that real value is complicated.
For this reason, the Autonomous Communities usually set reference values, so that if what is declared in the deed conforms to the indicated criteria, there is usually no verification of values.
However, now I want to go a little further, and refer to the value of the assets, movable or immovable, that I should put in a deed, whether or not it is the fiscal minimum, especially when it comes to deeds that contain adjudications by hereditary, and in this way deal with two issues that, from experience, are usually forgotten by many legal operators, such as the incidence of inheritance tax on income tax and the correct application of tax benefits.
THE RELATIONSHIPS BETWEEN INCOME TAX AND INHERITANCE TAX
Inheritance and gift taxes (ISD) and personal income tax (IRPF) constitute the basis of direct taxes in the Spanish tax system, which affect individuals, and its complementary nature must be remembered at the same time. that its incompatibility, since as indicated in article 4 of the Inheritance Tax Regulation "In no case may the same increase in assets be taxed by the Inheritance and Gift Tax and by the Personal Income Tax."
This means that the inheritance tax will be paid for what is received by inheritance, and once the inherited assets are integrated into the heir's estate, through the adjudication or division of inheritance, the profits generated by said assets (yields) or that become apparent on the occasion of its transmission, will be integrated into your income, for which you will pay the corresponding tax (IRPF), in the terms provided by your regulatory law.
WHAT SIGNIFICANCE DOES THE VALUE GIVEN TO AN ASSETS HAVE IN AN INHERITANCE DEED? .
For the purposes we are dealing with, there are two effects:
a.- The first is that the corresponding tax (ISD) is paid on the value that is placed, or the one that results from a value check.
In the case of an inheritance made up of a property to which a value of 160,000 euros is placed, the inheritance tax will be paid for that 160,000 euros.
The exact amount depends on the applicable regulation, since it is a tax assigned to the autonomous communities.
b.- The second is that the value that we have put in the deed or the one that results from a value check, will be considered as an acquisition value for the purposes of calculating the capital gain in the event of onerous alienation (for example, sale, exchange , contribution to society...) or free (donation).
The income tax law states that the amount of capital gains or losses will be the difference between the acquisition and transfer values of the capital elements.
In the case of assets received by inheritance, the acquisition value will be the one resulting from the application of the Inheritance and Gift Tax regulations, without exceeding the market value..
As we can see, the IRPF law establishes an upward limit, so that we cannot put exorbitant values.
As I usually do in other entries we are going to exemplify. Although I advance that these are examples, and not real simulations, which are simplified to the maximum, so the data is not exact to the 100%, but mere approximations.
EXAMPLE 1. Inheritance between father and son.
On January 1, 2013, a son inherits a flat in Barcelona from his father, the value of which can be put into writing, according to the tables of the Autonomous Community of Catalonia, is 160,000. However, it considers that the market situation can improve and that it has a target value of 320,000 euros, which is the amount for which the sale is finally made on June 30, 2016.
What value should you put in the deed of inheritance? The minimum of 160,000 or for which you intend to sell 320,000 euros? Let's see
If we put the value of 160,000 euros, we have:
For the inheritance of 160,000 euros, the inheritance tax quota was, in 2013, 0 euros.
For the sale, he would have a profit of 160,000 (320,000-160,000) for which he would pay in personal income tax, approximately 35,000 euros.
The global cost in taxes would be approximately 35,000 euros. And the risk from checking values is practically non-existent, as it would lead us to the following scenario.
If we put the value of 320,000 euros, we have:
For the inheritance of 320,000 euros, the inheritance tax fee would be 19.11 euros
For the sale, you would have a profit of 0 euros (320,000-320,000) for which you would not pay in personal income tax.
The global cost in taxes would be approximately 19.31 euros.
In this case it seems preferable to put the higher value of 320,000 euros.
EXAMPLE 2. Inheritance between uncle and second nephew. (Grade IV in ISD)
On January 1, 2013, a nephew inherits a flat in Barcelona from his second-uncle, the value of which can be put into writing, according to the tables of the Autonomous Community of Catalonia, is 160,000. However, it considers that the market situation can improve and that it has a target value of 320,000 euros, which is the amount for which the sale is finally made on June 30, 2016.
What value should you put in the deed of inheritance? The minimum of 160,000 or for which they intend to sell 320,000 euros?
If we put the value of 160,000 euros, we have:
For the inheritance of 160,000 euros, the inheritance tax quota, in 2013, would be 34,032 euros.
From the sale, you would have a profit of 160,000 (320,000-160,000) for which you would pay (deducting acquisition taxes) in personal income tax, approximately 28,000 euros.
The global cost in taxes would be approximately 60,032 euros, although it would be possible to check the values of the inheritance, which would say that the value of the property was 320,000 euros, the acceptance of inheritance and sale not being carried out simultaneously, it is not usual for the is.
Regarding the concept of verification of values, I refer to this entrance from my partner Eduardo Amat
If we put the value of 320,000 euros, we have
For the inheritance of 320,000 euros, the inheritance tax quota, in 2013, would be 90,064 euros
For the sale, you would have a profit of 0 euros (320,000-320,000) for which you would not pay in personal income tax.
The global cost in taxes would be approximately 90,064 euros.
In this case it seems preferable to put the value above 160,000 euros.
EXAMPLE 3. Acquisition of properties with derisory value.
A nephew inherits a farm from his uncle, in 2013, which, according to the values set by the Autonomous Community of Catalonia, has a value of 100 euros. It is a surplus orchard, but it is known that the neighboring owner is interested in buying it and makes an offer of 6,000 euros, and the sale is formalized in 2016.
If we put the value of 100 euros, we have:
For the inheritance of 100 euros, the inheritance tax fee would be 0 euros.
For the sale, he would have a profit of 5,900 (6,000-100) for which he would pay in personal income tax, 1,121 euros.
The global cost in taxes would be approximately 1,121 euros
If we put the value of 6,000 euros, we have:
For the inheritance of 6,000 euros, the inheritance tax fee would be 0 euros
For the sale, you would have a profit of 0 euros (6,000-6,000) for which you would not pay in personal income tax.
The global cost in taxes would be approximately 0 euros
EXAMPLE 4. The correct application of tax credits.
In 2013, a son inherited from his father an apartment in Lleida, which was the habitual residence of the deceased, whose value that can be put in writing, according to the tables of the Autonomous Community of Catalonia, is 160,000 euros, which coincides with the maximum price that can be obtained in case of sale, which is carried out in 2016.
Is it reasonable to request the application of tax credits for having inherited the habitual residence?
Let's see how these bonuses work
For the inheritance of 160,000 euros, the inheritance tax fee would be 0 euros.
For the sale, you would have a profit of 0 euros (160,000-160,000) for which you would not pay in personal income tax.
However, having requested the rebate for habitual residence, it turns out that a ban on disposal will appear in the property registry for a period of five years, until the payment of the rebate amount is justified (even if it is 0 euros) and late-payment interest.
If the buyer, as usual, requests a mortgage loan, the "Lifting the ban on disposing" will cause delays and expenses, which would have been perfectly avoidable if they had not requested a bonus that was useless.
All these cases are totally real.
Example 1 is a query that I have had through this website. It was inherited for 160,000 euros and sold for 320,000 euros. Could something have been done before the sale? I believe that without the inheritance tax being prescribed, the most reasonable thing would have been, at least, to carry out a deed of rectification of the inheritance setting a value closer or identical to that of the sale and present a complementary liquidation in the Autonomous Treasury.
Example 2, the heir was well advised by his tax advisor, and a value of 160,000 was placed on the inheritance. It is true that there could be a verification of values within the four-year term of the tax prescription, but from experience, as I have said before, these verifications are very rare, when there is no simultaneity between the two acts.
In example 3, the heir appeared at my Notary with his acquisition value of 100 euros. As a joke, I asked him if he had exchanged that property for the value of an item from a Chinese store, or a second-hand refrigerator.
In example 4, the seller has been forced to withhold 1,000 euros from the sale price by the Bank agency, as expenses for the lifting of the ban on disposal.
As always, I end up recommending correct advice on any hereditary adjudication.
This article deals with a question that, as I said, is unfortunately largely forgotten.
For more practical advice on inheritance in Catalonia, I refer you to this entrance from tottributs.com
In Lleida December 23, 2017.
