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2021 Wealth Tax practical guide.

Example: Exemption from holdings in certain entities

Ms. G.V.C. In the financial year, it obtained 2021 net earned income of 50,000 euros.

It also obtained €120,000 for net earnings from the exercise of a professional activity that it carries out on a regular, personal and direct basis. The assets and rights assigned to this activity are exempt in this exercise of Wealth Tax, as the requirements for this purpose are met.

Ms. G.V.C., also participates, with a percentage of 33 per cent in the share capital of the "Alfa" and "Beta" public limited companies, which are not listed on the stock market and are not subject to the equity company regime. 100

In both companies, he/she has management functions, and therefore in 2021, for earned income, he/she received the following remuneration:

  • S.A. "Alpha": 15,000 Euros.
  • S.A. "Beta": 76,000 Euros.

In accordance with the accounting records of the duly audited "Beta" S.A., the net value of the assets of the entity used for economic activity amounted to EUR 2,000,000, while the total value of the institution's net assets in 2021 was EUR 2,600,000. In addition, according to the bank's accounting data, the value of the stake of Ms. V.G.C., for the purposes of Wealth Tax, amounts to 150,000 euros.

Determine the value of exempt holdings in Wealth Tax in 2021.

Solution

1. Percentage of participation:

The holder of the shares meets the minimum percentage of ownership required to apply the exemption in each of the two companies.

2. Percentage of remuneration for management functions exercised within each entity:

  • S.A. "Alpha": 15,000 X 100 ÷ 65,000 = 23.08 per 100
  • S.A. "Beta": 76,000 X 100 ÷ 126,000 = 60.32 per 100

The percentage of remuneration is calculated separately for each of the entities, without the income being counted in both cases net of the economic activity carried out by Ms. G.V.C., whose assets and rights are subject to exemption from Wealth Tax, nor those obtained in the other entity.

In view of the percentages obtained, only the exemption of the holdings in the S.A. "Beta" is applicable, as remuneration for the management functions carried out in this company exceeds 50% of the net earned income in 100. 2021

3. Determination of the amount exempt from the shares:

As there are assets and rights that are not subject to the exercise of economic activity in the balance sheet of the S.A. "Beta," the specific value of exempt holdings is determined as follows:

150,000 X 2,000,000 ÷ 2,600,000 = 115,384.62 euros.