Cantabria Inheritance Tax. Reductions and Bonifications.

Introduction

The Inheritance and Gift Tax is a state tax. It is regulated by Law 29/1987, of December 18, on the Tax on Inheritance and Gift Taxes and the Regulation that develops it is Royal Decree 1629/1991, of November 8.  But, this national tax can be adapted and improved by regions. So, for Cantabria region, the Inheritance and Donation Tax is regulated and adapted by the regional law Decreto Legislativo 62/2008, de 19 de junio, por el que se aprueba el texto refundido de la Ley de Medidas Fiscales en materia de Tributos cedidos por el Estado

In this section we will detail exclusively  reductions, tax rate and bonus  on the Inheriance and Donation Cantabria  tax. For other aspects as Process of Inheritance, Executing a foreign Will etc, please, visit our Inheritance Process section, where all aspects and procedures may be reproduced in inheritance process independently of the specific executed region. 

In inheritance tax in Cantabria there are a series of tax benefits that can reduce the amount to be paid. These are the highlights:

Reduction for kinship

A reduction in the taxable base is applied according to the degree of kinship with the deceased:

• In the case of spouses, ascendants, descendants and adopters or adoptees of the deceased, the reduction is €50,000.  
• If the heir or legatee has a disability equal to or greater than 33%. This reduction is extended to €100,000
• In the case of second-degree collaterals (siblings), a reduction of €8,000  is applied
• For third degree students  (uncles and nephews) €4,000

Reduction for family businesses or shares in entities

For spouses, ascendants, descendants or second-degree collateral who acquire the family business or shares in entities, a reduction of 95% of the taxable base is applied.  However, if you want to obtain this reduction, you must:

• The activity is the main source of income of the deceased;
• The ownership and exercise of the activity is maintained for five years following the death;
• It is taxed by the direct estimation method in Personal Income Tax.

Reduction for main residence

A reduction of 95% of the taxable base is applied  to spouses, ascendants, descendants or second-degree collaterals who acquire the deceased’s habitual residence, provided that the following requirements are met:

• That its value does not exceed €300,000
• That the ownership and use of the home is maintained for five years following the death
• and that it is taxed by the direct estimation method in the Personal Income Tax.

Kinship reduction

In the case  of mortis causa acquisitions, including those of beneficiaries of life insurance policies, the taxable base will be obtained by applying to the taxable base the corresponding reduction of those included in the following groups:

• Group I (acquisitions by descendants and adoptees under 21 years of age): 50,000 euros, plus 5,000 euros for each year of less than 21 years of age that the deceased has
• Group II (acquisitions by descendants and adoptees aged twenty-one or over, spouses and ascendants and adoptive parents): 50,000 euros.
• Group III (acquisitions by second- and third-degree collaterals and by ascendants and descendants by affinity):
  • Second-degree collateral by consanguinity: 25,000 euros.
  • Rest of group III: 8,000 euros.
• Group IV (acquisitions by collateral relatives of the fourth degree or of more distant degrees and by strangers): No reduction is applied on the basis of kinship.

For the purposes of applying the reductions in the taxable base regulated in this article, the descendants included in group II shall be assimilated to those persons called to the inheritance and belonging to groups III and IV, linked to the deceased with disability as a guardian or curator or de facto guardian judicially declared, or, in the latter case, administratively recognised, this figure has been protocolised at the request of the deceased or who proves that he or she has lived with the deceased for at least the two years immediately prior to his or her death [Article 5.a).1 of Legislative Decree 62/2008, of 19 June].

In acquisitions mortis causa by groups I, II and III of the deceased’s main residence, a reduction of 95% of the value of the  same can be applied to the taxable base, with a limit of 125,000 euros for each taxable person, and a period of permanence of 5 years is required. In the case of the collateral relatives of the deceased, in order to enjoy this reduction, they must be over 65 years of age and must have lived with the deceased for at least 2 years prior to their death [article 5.a).5 of Legislative Decree 62/2008, of 19 June].

For the purposes of applying the reduction, in addition to this one, a storage room and up to two parking plates may be considered as a habitual residence, even if they have not been acquired simultaneously in a single act, if they are located in the same building or urban complex and if on the date of the death of the deceased they were at his disposal,  without having been assigned to third parties.

Acquisition of a company, business or shares

In cases in which the taxable base of an acquisition mortis causa, by persons belonging to kinship groups I and II, includes the value of a sole proprietorship, of a professional business, including those related to production and marketing in the livestock, agricultural or fishing sector, or shares in entities to which the exemption regulated in the eighth paragraph of Article 4 of the Law 19/1991, of 6 June, on Wealth Tax, or on usufruct rights over the same, in order to obtain the taxable base, another of 99% of the aforementioned value will be applied to the taxable base, regardless of other reductions  . In the event that there are no purchasers in group I and II, the reduction will be applied to acquisitions up to the fourth degree and with the same requirements as above. In any case, the surviving spouse will be entitled to the 99% reduction [Article 5.a).4 of Legislative Decree 62/2008, of 19 June].

Acquisitions of inter vivos shares, in favour of relatives up to the fourth degree, of a sole proprietorship, of a professional business, including those related to production and marketing in the livestock, agricultural or fishing sector, or of shares in entities of the donor to which the exemption regulated in the eighth paragraph of Article 4 of Law 19/1991 applies,  of 6 June, on Wealth Tax, a reduction in the taxable base of 99% of the acquisition value will be applied to determine the taxable  amount [article 5.B).1 of Legislative Decree 62/2008, of 19 June]. Requirements:

a) That the donor is sixty-five years of age or older or is in a situation of permanent disability, absolute or severe disability.

b) As for the donee, he must keep what he acquired and be entitled to exemption from Wealth Tax for five years following the date of the public deed of donation, unless he dies within this period. Likewise, the donee may not carry out acts of disposition and corporate operations that, directly or indirectly, may give rise to a substantial reduction in the value of the acquisition.

In these same cases of inter vivos acquisition  of a company or professional business, when there are no acquiring relatives up to the fourth degree, and with the same requirements set out in the previous precept, foreign donees will be entitled to a 99% reduction  in the taxable base.

In the event that the requirements referred to in this section are not met, the part of the tax that has not been paid as a result of the reduction made and the interest for late payment must be paid.

Life insurance 

Regardless of the reduction for kinship, a reduction of 100%, up to a limit of €50,000, will be applied to the amounts received by beneficiaries of life insurance contracts, for persons included in kinship groups I and II. In group insurance or insurance taken out by companies in favour of their employees, the degree of kinship between the deceased insured person and the beneficiary will be taken into account [article 5.a).2 of Legislative Decree 62/2008, of 19 June].

Improvement of the state reduction for acquisitions of Spanish Historical Heritage or Historical or Cultural Heritage of the Autonomous Communities. 

When the taxable base corresponding to an acquisition mortis causa by relatives of group I and II of the deceased person includes assets included in sections one, two or three of article 4 of Law 19/1991, of 6 June, on Wealth Tax, as part of the Spanish Historical Heritage or the Historical or Cultural Heritage of the Autonomous Communities,  a reduction of 95%  of its value will also be applied, with a period of permanence of 5 years [article 5.a).6 of Legislative Decree 62/2008, of 19 June].

Donations in favour of the spouse, descendants or adopted persons, of the assets included in sections one, two and three of article 4 of Law 19/1991, of 6 June, on Wealth Tax, as part of the Spanish Historical Heritage or the Historical or Cultural Heritage of the Autonomous Communities, will enjoy a reduction in the taxable base of 95%.  provided that the requirements for the improvement in the reduction for inter vivos acquisition of a company, business or shares are met [article 5.b).2 of Legislative Decree 62/2008, of 19 June].

Failure to comply with the requirements will entail the payment of the tax not paid and the corresponding interest for late payment.

100% reduction on second and subsequent transfers

Deduction of 100% of the tax paid on previous transfers in cases where the same assets have been the subject of two or more mortis causa transfers  in a maximum period of 10 years [Article 5.a).8 of Legislative Decree 62/2008, of 19 June].

Ttransfer and reversion of assets contributed to protected assets

A 100% reduction will be applied  to mortis causa patrimonial acquisitions  that occur as a result of the reversion of assets contributed to protected assets to the contributor in the event of extinction of the assets due to the death of their owner.

Tax Rate

The general scale is established as that set out in state regulations. However, the full amount of inheritance and gift tax on lucrative inter vivos transfers  in favour of taxpayers in groups I and II is obtained as a result of applying the following scale to the taxable base: