Donation of the usufruct in Spain

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How many times have we heard of the unfairness of the Inheritance and Donations Tax (ISD) in force in the autonomous community of Andalusia, whilst in other communities, such as Madrid or Valencia, hardly any tax is paid. We personally hear this so often, and there a reason for it.

This injustice exists amongst the autonomous communities in the application of these taxes, which are assigned by the state to the communities. The existing alternatives to avoid such tax are very small: either you change your fiscal address, or you have to study thoroughly the law to look for the most favourable alternative.

If an Andalusian businessman, owner of a trade company, wants to donate 100,000€ to his son (not to acquire an habitual home), he can find yourself with the unpleasant surprise that he has to pay the Inheritance and Donations Tax (ISD) of some 30,000€ when in Madrid or Valencia no taxes would have to be paid.

What alternative does a businessman have to donate money to his son, or to whoever he wants, avoiding paying those exorbitant sums? He could for example constitute a TEMPORARY USUFRUCT on his corporate shares or funds, or any other title that he can generate income in favour of that person.

The constitution of the temporary usufruct in Spain is valued for each year of duration of said usufruct at 2% of the real value of the shares or funds. This amount is levied by the Inheritance and Donations Tax. In the previous example, the tax to be paid would be around 2,000€, so he could save 28,000€.

If you are interested in this issue, do not hesitate to contact us, and we can answer any questions you may have regarding tax or tax matters in Spain

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