At first sight, it may seem that both Tax figures have nothing in common. Wealth Tax essentially taxes the goods and rights of the taxpayer and Inheritance Tax basically taxes the goods and rights received by the heirs or legatees. However, Inheritance and Wealth Tax have a common denominator; both residents and family businesses can be exempt of these taxes if certain requirements are met. With regards to Wealth Tax, the most popular exemption that most taxpayers may apply is that of residency. During 2011, 2012 and 2013 tax periods, the value of the primary residence is exempt up to a maximum of 300,000 € (unless the autonomous community in which the individual tributes set a different amount). With regards to the Spanish Inheritance there is a 95 % reduction for Residence if certain requirements are met.
Exemption for residents and owners of family business
At the same time, with respect to both Tax figures, the value of stocks and shares a person holds in a company are also exempt from tax without limitation as long as the following requirements are met:
1. Minimum Participation
First, one of the following must be applicable:
- The individual holds at least 5% of the capital of the company individually
- The individual has at least 20% jointly with his/her spouse, ascendants, descendants or collateral relatives up to second degree.
2. Economic activity
Another requirement is that the main activity of the consist does not consist in the mere possession of a property or shares in other companies, so that more than 50% of assets should be subject to economic activities. In order to fulfill this requirement the company shall have:
- A premise
- At least one worker
3. Remuneration of directors
Finally, it is necessary that the individual who owns the shares, the spouse, or one of his ascendants, descendants or collateral relatives up to second degree, exercises effective management functions (as a manager, administrator, head department, etc…) and:
- Owns at least one share.
- His / her annual remuneration for exercising such office constitutes 50% of all the income received with regards to the employment or an economic activity.