Amongst the proposed fiscal changes for 2015, many of them very beneficial, are, of course the changes in the Succession and Gift tax, especially in light of the European court ruling of last September. It is this particular tax that I will be discussing today. For two reasons, firstly because it is probably the most serious of the reforms, along with the “plus valia” reform and secondly because it affects me personally!
The fact is that we are not aware of exactly how this tax will be reformed or exactly when, but what it appears that it will do is a lot of damage to the pocket of residents (although for non residents much less so than before). We know that residents and non residents will be treated the same, which is good, however, the proposals are a minimum tax of 4-5% for direct descendants and spouses, increasing to around 10-11% for heirs that have no bloodline connection. It is also proposed that all the reductions in force at present will be eliminated, including the rather hefty 150,000€ exemption for direct descendants and the reduction for inheriting a parent’s habitual home. This means much, much higher dues to pay. And I don’t know about you, but that has scared me enough to rethink my own situation, and decide to proceed now with the gifting of my parent’s home to me, rather than waiting to see what happens, when I will no longer be able to avoid the tax! This, together with the elimination of the deductions on the plus valia currently applicable making this local tax much more expensive (yes, more expensive than it already is) means that it just makes sense to get this over and done with now.
It is true that these are just proposals, for the time being, and it may well be that the reform will turn out to be less damaging than it sounds. However, many law firms have been reporting an avalanche in transactions “inter vivos” (gifting), or simply selling their properties, even at a loss, before the end of the year.
Whilst it is difficult to make provisions when you don’t know what you’re facing, the future of the Inheritance & Gift Tax for Residents doesn’t look rosy, and I can’t urge you all enough to PLAN AHEAD and quickly, especially those who are lucky enough to have large estates.