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2021 Wealth Tax practical guide.

Requirements and conditions for the exemption to be applied

For the exemption to be applicable, the following requirements and conditions must be met at the date of accrual of tax (31 December):

  1. The entity, whether or not a company, carries out an economic activity and does not have the main activity of managing movable or immovable assets.

    An entity will be understood to manage movable or immovable assets and therefore not carry out an economic activity when any of the following conditions are met for more than 90 days of the financial year:

    • That more than half of its assets are constituted by securities or

    • That more than half of your assets are not affected by economic activities.

      To determine whether there is an economic activity or whether an equity element is affected by it, the provisions of the Personal Income Tax will be complied with. See for these purposes Articles 27 and 29 of the Personal Income Tax Act and 22 of the Personal Income Tax Regulation.

    Both the value of the asset and the value of the equity elements not used for economic activities will be that which is derived from the accounting, provided that this faithfully reflects the true equity situation of the company.

    For the purpose of determining the part of the asset that is constituted by unassigned securities or equity elements, the following values will not be included:

    • The owners to comply with legal and regulatory obligations.

    • Those that incorporate credit rights arising from contractual relationships established as a result of economic activities.

    • Those owned by securities companies as a result of the exercise of the constituent activity of their purpose.

    • Those who have at least 5% of the voting rights and are granted for the purpose of directing and managing the 100 participation provided that, for these purposes, the corresponding organisation of material and personal means is available, and the investee is not included in this letter.

      Notwithstanding the above, securities and elements not subject to economic activities shall not be counted as securities whose acquisition price does not exceed the amount of the undistributed profits obtained by the company, provided that these profits come from economic activities, with the limit of amount of the profits obtained both in the year and in the last 10 years.

      For these purposes, dividends from the securities referred to in the last paragraph 90 above, when the income obtained by the investee company comes, at least in 100%, from the performance of economic activities.

  2. That the taxpayer's participation in the entity's capital is at least 5 per 100, calculated in a individual, or 20 per cent together with their spouse, ascendants, descendants or second-degree relatives, 100 its origin in blood, affinity or adoption.

    When the participation in the entity is joint with any or some of the aforementioned persons, the management functions and the remuneration derived from at least one of the persons in the family group must be met, without prejudice to all of them being entitled to the exemption.

  3. The taxpayer effectively carries out management functions in the entity. For these purposes, management functions shall be considered, which must be reliably accredited by the corresponding contract or appointment, the positions of: Chairman, Managing Director, Manager, Administrator, Department Directors, Directors and members of the Board of Directors or equivalent body, provided that the performance of any of these positions involves effective intervention in the company's decisions.

    In the event that the holders of the shares or holdings are minors or disabled, this condition shall be deemed to be fulfilled when their legal representatives are in agreement with the same.

  4. That, for the management functions exercised at the bank, the taxpayer receives remuneration that represents more than 50 per cent of all their net income from work and economic activities corresponding to the 100 financial year. 2020

    The relevant aspect is not so much the name of the position, but that this position involves the functions of administration, management, coordination and operation of the corresponding organisation. Criterion established by the Supreme Court in a judgment of 18 January of relapse into the cassation appeal for the unification of doctrine 2316/2015.

    For the purposes of determining this percentage, the income from the economic activities carried out in a normal manner, personal and direct by the taxpayer whose assets and rights are exempt from this tax will not be counted.

    When the same person is directly the holder of shares in several entities where the aforementioned requirements and conditions are met, the percentage of 50 per 100 will be calculated separately from each of these entities. In other words, not including income derived from the performance of management functions obtained in other entities.

Attention: Once the aforementioned requirements have been met, the exemption may be applied, in addition to the holder of full ownership or bare ownership of the shares and holdings, the holder of the right of usufruct life on the same.