The Supreme Court has ruled in favor of an heir to apply the 90% reduction in the Inheritance Tax for the acquisition of an agricultural property, considering that the subsequent loss of the priority exploitation classification is not enough, by itself, to withdraw that tax benefit. In this way, justice corrects the Andalusian Tax Agency, which wanted to collect a settlement of 36,961.70 euros, understanding that this reduction was no longer applicable after the property stopped having that condition a few months later.
It all begins when these children inherited in equal shares and, when submitting the self-assessment of the Inheritance and Donations tax, they applied a reduction for the acquisition of an agricultural holding. Later, the regional Treasury reviewed the case and ended up claiming 36,961.70 euros for this settlement when it understood that the 90% tax benefit was no longer applicable.
The reason was that the exploitation was no longer classified as a priority on June 5, 2014, just over four months after the death. From there, the Junta de Andalucía maintained that this loss prevented maintaining the reduction in Inheritance and defended that the heir should pay the amount that he had stopped paying.
That was the true legal conflict of the matter, since it was discussed whether the fact of losing that condition months later required the return of the tax deduction applied to the inheritance. The Junta de Andalucía alleged a broad interpretation of article 9 of the Law on the Modernization of Agricultural Holdings. In his opinion, the purpose of the rule was to keep this priority exploitation condition alive and, if it disappeared in the following five years, the reduction should not be consolidated.
Faced with this situation, the heir maintained that the law requires that, as a consequence of the transfer, “the priority status is not altered,” but the five-year period that appears in the norm refers to other different cases, such as selling, renting or transferring the properties. That was the fundamental difference between both positions.
The Supreme Court clarifies that a subsequent loss is not enough to eliminate the deduction in the Inheritance tax
The Supreme Court agrees with the opinion of the Superior Court of Andalusia and rejects the Board’s appeal. The ruling explains that the loss of priority exploitation status occurred after the inheritance and for a cause unrelated to that transmission. And he adds that the Administration did not prove that the properties had been sold, rented or transferred within the following five years, which are the cases in which the law does expressly provide for the loss of profit.
For this reason, the Court establishes doctrine and makes it clear that the 90% reduction in Inheritance does not automatically disappear just because the exploitation later loses its priority status. According to the Supreme Court, the norm does not contemplate this sudden withdrawal when that loss does not derive directly from hereditary transmission.
The ruling ends by confirming the previous ruling and declaring “there is no place for the appeal” presented by the Junta de Andalucía. In other words, the heir retains the reduction and the settlement that claimed 36,961.70 euros is void.