One of the legal requirements established for the application of the Autonomous Community of Aragon’s own reduction of 99% in the inheritance and gift tax is that the assets of the companies be used for an economic activity. The consequence of an item being considered as unaffected is that it does not benefit from the reduction, being valued at its real value at the time of accrual of the tax, and being taxed through the application of the following formula:
“Value of Assets Affected Assets-Debts Affected Assets/Total Net Worth”.
In this regard, I am going to refer to the problem that exists in relation to cash, given the contradictory legislation as to whether or not securities representing the assignment of equity to third parties are considered as assets subject to tax.
It is important to differentiate between two cases, the transfer of these assets by an individual entrepreneur or professional and the transfer of shares in an entity.
Regarding the first case, the Directorate General of Taxes (DGT) in several binding consultations, among others 0612-04 12/03/2004, concludes that, in the case of taxpayers liable for Personal Income Tax, bank accounts, shares and similar securities will in no case be considered as affected to the activity.
With regard to the second case, the legislative contradiction arises between the Personal Income Tax, which considers them to be unaffected as we have indicated, and the wealth tax regulation, which determines that they can be affected to the economic activity, proving it in a timely manner.
The TEAC Resolution 00/02155/2012/00/00, resolves in this respect that it cannot be concluded that all bank current accounts must be excluded from the possibility of being considered as asset items assigned to an economic activity.
What is relevant is to determine whether the assets are really necessary for the exercise of the activity, that is to say, to verify whether the balance and movements of the current accounts correspond to the vicissitudes of the periodic exercise of the activity and whether they are used for its purposes. The exclusion of cash, as it is considered not to be an element related to the business activity, would require an analysis of the proportionality between the average balance in said bank account with the working capital needs, taking into account the banking movement of receipts and payments produced in a fiscal year. Only to the extent that the average bank balance exceeds the working capital requirements is it possible to speak of the existence of idle cash or cash not necessary for such activity and, therefore, excludable for the purpose of calculating the tax benefit.
Sergio Inglán Agustín
Lawyer
