Inheritance and Gift Tax in Valencia: Key Aspects
IV. Application Management
1. Duty to Declare
There is a duty to declare the inheritance and gift tax. The deadline for filing the inheritance tax is 6 months after the date of death, while the tax on donations is 30 days from the date of the act (Saturdays are considered working days).
Documentation attached to the inheritance tax return includes:
- Death Certificate
- Certificate of registration of acts of last will
- The will, if there is one
- A list of assets of the estate, including the spouse’s marital assets
2. Tax Yield
Inheritance and gift taxes are ceded to the Autonomous Communities (ACs). Therefore, the ACs are responsible for the collection and inspection of these taxes.
The connection point in the inheritance tax is the region of residence of the deceased at the time of accrual. The connection point for the donation tax is the residence of the donee in the corresponding Autonomous Community.
3. Verification of Securities
The administration can check the real value of the goods. For real estate, since the 2006 reform, a multiplier can be applied to the cadastral value of the property (which is the value used for property tax purposes).
Example: Assessed value: 1000; Multiplier: 1.8; 1.8 x 1000 = 1800 (The multiplier is different for each municipality).
If the taxpayer self-assesses the value obtained by multiplying this ratio, the manager will not check the value.
4. Contradictory Expert Appraisal
Within one month from the notification of assessment derived from the tax audit, the taxpayer may request a contradictory expert appraisal procedure. This involves:
- Presentation of the appraisal sheet by the administration’s expert and the taxpayer’s expert.
- If there is a significant difference between the two valuations, a third expert will be appointed to make their assessment. The liquidation will be based on the valuation of the third expert, limited by the declared value (minimum) and the proven value (maximum).
If the difference is small, the settlement will be based on the value given by the taxpayer’s expert witness. A ‘small’ difference is defined as the administration’s valuation exceeding the taxpayer’s expert valuation by no more than 10% *and* this difference is no more than 120,000 Euros.
V. Autonomic Regulations
Inheritance Tax
Since 2006, the Autonomous Community of Valencia has introduced a 99% bonus on the tax bill for acquisitions by relatives in Groups I and II who reside in the Autonomous Community of Valencia.
Gift Tax
In the Autonomous Community of Valencia, since 2002, a reduction in the tax base has been introduced. For Group II, it is 40,000 Euros. For Group I, it is 40,000 Euros plus 8,000 Euros per year under 21, with a limit. The requirements are:
- Residence of the donee in the Autonomous Community.
- The donee’s net worth must not exceed 2 million Euros.
Also, since 2006, a 99% bonus on the tax has been introduced if the purchaser is a child or parent, with a maximum of 420,000 Euros. The requirements are:
- Residence of the donee in the Autonomous Community of Valencia.
- The donee’s net worth must not exceed 2 million Euros.
Example: You receive a donation that qualifies for a reduction, amounting to 46,000 Euros, and the tax rate is 7.65%. What is the tax payable in the gift tax?
Tax Base: 46,000 Euros; Reduction (Group II): 40,000 Euros; Taxable Base: 6,000 Euros; Tax Rate: 7.65%; Gross Tax Liability: 459 Euros; 99% Bonus: 454.41 Euros; Net Tax Payable: 4.59 Euros.
Explanation: The first step is to subtract the reduction. The result is the taxable income. We apply the tax rate to get the gross tax liability. Then, we calculate 99% of the gross tax liability and subtract it to arrive at the net tax payable.