Tax Relief for Transferring a Family Business in Catalonia

Transferring a family business in Catalonia can benefit from significant tax reductions, especially in the Inheritance and Gift Tax (ISD). One of the most notable is the 95% reduction in the ISD tax base, designed to facilitate the continuity of family businesses and prevent their decapitalization when passed on to the next generation.

Requirements for applying the 95% reduction in Catalonia

To benefit from this reduction in Catalonia, certain requirements must be met:

1. Real economic activity: The company must conduct effective economic activity. It must not be considered as an asset-holding entity. In the case of companies dedicated to the rental of real estate, it is essential to have at least one full-time employee dedicated to the management of this activity (there must be a sufficient workload to have a full-time employee).
2. Minimum shareholding: The donor must own at least 5% of the company’s share capital individually, or 20% jointly with his/her spouse, ascendants, descendants or collaterals up to the second degree.
3. Maintenance of the activity: The beneficiary of the transfer must maintain the economic activity of the company for a minimum period of 5 years.
4. Age of donor: In the case of donations, the donor must be at least 65 years old and no longer managing the company.

Additional considerations

It is important to note that the application of this relief may vary depending on the interpretation of the tax authorities and current case law. For example, the Supreme Court is assessing the limits of this reduction in specific cases, such as family companies dedicated to the rental of real estate managed by employees of another entity of the same group.

The 95% reduction in ISD when transferring a family business in Catalonia represents a significant opportunity to facilitate generational handover and preserve business assets. However, due to the complexity of the requirements and possible legal interpretations, specialist advice is recommended to ensure compliance with all conditions and maximise the tax benefits.