The Superior Court of Justice of Madrid has ruled in favor, although partially, of two heirs, who considered unfair the surcharge of 18,423.23 euros that had been made to them in the settlement of the Inheritance Tax for the household trousseau, that is, the furniture. Justice clarifies that this increase in the tax should only be made when it comes to the habitual residence, but not on all inherited properties. Thus, although it is assumed that “there must be furniture,” the heirs can demonstrate that this is not the case or that its price is lower.
It all starts when two nephews (Mari Luz and Celso) were designated as heirs as a legatee of their uncle’s will. In the inheritance there were two homes in Madrid, which were empty (this being the origin of the dispute), in addition to other assets. When presenting the self-assessment of the Inheritance Tax before the Community of Madrid, the heirs declared 700 euros, as household goods (furniture), explaining that “one of the homes lacked furniture and belongings.”
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Although they put in the amount of 700 euros since the home was empty, the administration of the Community of Madrid applied a 3% increase in accordance with the automatic criterion provided for in the law, which caused the inheritance tax base to rise to 18,423.23 euros.
After receiving the resolution, the heirs complained to the Community of Madrid, explaining that said calculation was erroneous, since that 3% could only be applied to habitual homes that had furniture, which was not the case. The Community of Madrid continued to maintain its position, which is why they decided to go to court.
The trousseau only counts as taxation if it is the habitual residence
In the first instance, both the General Directorate of Taxes in the reconsideration appeal phase, and the Regional Economic-Administrative Court (TEAR) of Madrid in the economic-administrative route did not agree with the heirs, that is, they had to continue paying those 18,423 euros as 3%. Both organizations explained that “the expert reports lacked probative value,” since they were not prepared by an appraiser specialized in movable property, and that the plaintiffs had not sufficiently proven a lower value than that applied by the Administration.
Not being satisfied, the heirs decided to file a petition before the Superior Court of Justice of Madrid, who agreed with them. After reviewing the documentation, I explain that “domestic trousseau includes only movable property used to serve the deceased’s habitual residence, not all real estate.” For this reason, “it was not appropriate to calculate the value of the household goods on the empty home”, so the 3% should only be applied to the value of the home where furniture and belongings actually existed.
The court agrees with the heirs
In this resolution, the key is that the will expressly identified both the homes and the personal property, which is why the Administration automatically applied the 3% provided by law in the Inheritance Tax. The problem arose when it was found that one of the homes was completely empty, without furniture or belongings, so the corresponding surcharge for household goods could not be applied.
For this reason, the Superior Court of Justice of Madrid partially agreed with the heirs. The Chamber considered it proven that one of the apartments lacked furniture and recalled that, in accordance with the doctrine of the Supreme Court (STS 342/2020), the 3% percentage can only be applied to the habitual residence of the deceased, not to all the properties included in the inheritance. This interpretation derives from article 15 of Law 29/1987, on the Inheritance and Donation Tax, which allows taxpayers to demonstrate the non-existence or lower value of the household trousseau.