Law 3/2023 of 16 March: Main developments of the latest tax reform in Catalonia
The year 2023 has not progressed much and the first tax amendment has already arrived with Law 3/2023 of 16 March on fiscal, financial, administrative and public sector measures for 2023 of the Generalitat of Catalonia. With this 2023 tax reform, certain taxes in Catalonia are modified, among which stand out the modification of the Inheritance and Donations Tax and the Property Transfer Tax and Documented Legal Acts, but it also affects others, as we will explain throughout this post.
Law 3/2023 of 16 March: Amendment of the inheritance and gift tax and of the tax on property transfers and documented legal acts
The current tax reform modifies various taxes and levies, including, among others, the Wealth Tax, the Gambling Tax, the Tax on stays in tourist establishments, the Tax on carbon dioxide emissions from motor vehicles and the Personal Income Tax (IRPF), among others. At JLA Notarios, notary office in Barcelona, we will focus on discussing the changes in the taxes most closely related to the notarial field.
I. Amendment of the Donations Tax of Catalonia
Firstly, we find the modification of the inheritance and gift tax of Catalunya. Next, we will break down and analyse the changes made. The following modifications occur:
1 – Reduction of 95% of donations of rural properties dedicated to forestry.
This new 95% reduction is introduced for donations of rural forest estates in the Donation Tax, provided that it is made between spouses, ascendants, descendants, and collateral relatives up to the third degree (this would include siblings, uncles, or nephews). To be able to benefit from this reduction, it will be necessary to:
- Have a forest management instrument.
- Be managed within the agreement, contract, or forest management agreement formalised with the administration.
- The rural forest estates must be located on land that has suffered forest fires within the twenty-five years prior to the date of the donation or that, in accordance with forest regulations, have been declared an urgent action zone due to the fires suffered.
- Keep the rural estate within the recipient's assets for at least 10 years.
2 – 95% reduction in the donation of property, land or money for the acquisition of what will constitute the donee's first main residence.
Until now, in the gift tax there was a reduction for donations in favour of descendants of a property that was to constitute their first habitual residence or of the money intended for its acquisition. The 2023 Law introduces a new reduction in this regard, as it will benefit the donation of land or money for the acquisition of these, provided that they are intended for the construction of their first habitual residence. To be eligible for this reduction, a series of requirements must be met:
- That the donation is made by public deed, the donee is under 36 years old, and the donee's income does not exceed €36,000;
- That, in the case of land, the donee's first habitual residence is built on it.
- That the construction is carried out within three years following the date of the donation
3 – 95% reduction for the donation of money to establish or acquire a company or a professional business or to acquire shares. It will be the donee's first main residence.
With the new amendment, the maximum amount of the tax reduction is increased, setting the maximum amount to be reduced at €200,000, which can reach €400,000 when the donees have a disability degree equal to or greater than 33%, when it concerns monetary donations in favour of descendants to establish or acquire a professional business or a company or to acquire shares, provided that the company, business or entity has its registered and tax address in Catalonia.
You can find more information about the taxes applied to donations from parents to children in the following article on our blog:
II. Change in the Inheritance Tax in Catalonia
In this case, the following modification occurs:
1 – 95% reduction in mortis causa acquisitions of rural properties dedicated to forestry.
With the new amendment, not only the land but also the buildings located on it and which are of use to them will benefit from the 95% reduction, provided that the acquirer is a spouse, descendant, ascendant, or collateral relative up to the third degree of the deceased.
On our blog, we have already published an article where we explain the inheritance tax and how much must be paid to inherit:
III. Amendment of the Property Transfer Tax and Stamp Duty
Related to the Property Transfer Tax and Stamp Duty, the following changes are made:
1-Discount on the purchase of a main residence for large families, people with disabilities, young people and single-parent families.
In Catalonia, there are certain reduced rates in the property transfer tax for the acquisition of the main residence, which instead of being set at the general 10%, is reduced to 5%, as we already explained in a previous article on our blog.
Well, until the amendment of 2023, the cap on the taxable base in the IRPF of the applicant for the benefit could not exceed €30,000. With the new reform, this amount is increased to €36,000, expanding the economic range of individuals and families who, from now on, will be able to benefit from this reduction. Furthermore, regarding the benefit for large families and single-parent families, this amount can be increased by €14,000 for each child exceeding the established minimum.
2 – 100% exemption from AJD on public deeds aimed at the promotion and exploitation of housing under a use transfer regime.
This discount will be applied to the granting of public deeds when non-profit housing cooperatives and social initiative cooperatives related to the promotion and exploitation of housing under a use transfer regime intervene, either for habitual and permanent use or intended for residences for elderly or disabled people. This discount will be applied to public deeds granted until 31 December 2025.
IV. Concept of Main Residence
The reform introduced by Law 3/2023, of 16 March, on fiscal, financial, administrative and public sector measures for 2023 clarifies the legal requirements that a dwelling must meet to be considered a main residence. The requirements are as follows, according to article 10 of the law:
- Both the dwelling and a storage room, and up to a maximum of two parking spaces, can be considered as the main residence. It will be necessary that all the properties have been acquired in a single transaction or that they are located in the same building or urban complex. In any case, it is required that at the time of acquisition they are at the disposal of the transferor, without having been assigned to third parties.
- The concept of property includes the land acquired to build the main residence.
- It is necessary that the dwelling is effectively and permanently inhabited by the taxpayer within twelve months following the date of acquisition of the dwelling or completion of construction works, with the works always needing to be finished within a maximum period of three years from acquisition.
- It is necessary to reside continuously for three years in the dwelling for it to be considered a main residence. There are some exceptions when circumstances require a change of residence. Examples of exclusion cases are marriage, marital separation, formation of a stable partnership, dissolution of a stable partnership, job transfer, or obtaining a first job or a more advantageous job. Other circumstances requiring a change of residence are also accepted.
JLA Notaries: specialists in Inheritances in Barcelona
In this article we have wanted to explain the recent changes that have occurred with the implementation of Law 3/2023, of 16 March, with the modification of the Inheritance and Donations Tax and the Tax on Property Transfers and Documented Legal Acts.
JLA Notarios are Notaries in Barcelona specialised in the processing of Inheritances with extensive training and experience in the various areas of Succession Law. So, do not hesitate to consult with us about any matter concerning you in this field. You can do so by filling in our contact form or by writing to us at the email bcn@jlanotarios.com. If you need to process an Inheritance in Barcelona or another matter, we will be happy to assist you.
