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Practical Income Manual 2022.

c) Lucrative "inter vivos" transfers (donations) of companies or shares

This case refers to donations in favor of the spouse, descendants or adoptees, of individual companies or of shares in entities of the donor to which the 95 percent reduction contemplated in section 6 of article 20 of Law 29 applies. /1987, of December 18, of the Inheritance and Donation Tax ( BOE of December 19).

Article 20.6 of Law 29/1987, of December 18, on Inheritance and Donation Tax, provides :

6. In cases of transfer of participations "inter vivos", in favor of the spouse, descendants or adopted, of an individual company, a professional business or of participations in entities of the donor to which the exemption regulated in the eighth section of the Article 4 of Law 19/1991, of June 6, on Wealth Tax, a reduction in the tax base will be applied to determine the taxable amount of 95 percent of the acquisition value, provided that the following conditions are met:

a) That the donor was sixty-five years old or older or was in a situation of permanent disability, in a degree of absolute or great disability.

b) That, if the donor was exercising management functions, he would cease to exercise and receive remuneration for the exercise of said functions from the moment of the transfer.

For these purposes, mere membership of the Board of Directors of the company will not be understood to be included among the management functions.

c) As for the donee, he must maintain what was acquired and have the right to exemption from the Wealth Tax for the ten 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 disposal and corporate operations that, directly or indirectly, may give rise to a substantial reduction in the value of the acquisition. This obligation will also apply in cases of "mortis causa" acquisitions referred to in letter c) of section 2 of this article.

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 carried out and late payment interest must be paid."

Regarding article 4.8 of Law 19/1991, of June 6, on the Wealth Tax referred to in transcribed article 26.6, see the section "Business and professional assets" of the general exemptions of article 4 of the aforementioned Law, within of chapter 2 of the practical manual of the Wealth Tax 2022.

In the case of assets that are affected by the taxpayer to the economic activity after their acquisition, they must have been affected uninterruptedly for at least five years prior to the date of transfer.

In these acquisitions, the donee will be subrogated to the position of the donor regarding the values and dates of acquisition of said assets (Art. 36 Law Personal Income Tax ).