It is very common to think that reject an inheritance so that it can be received by a brother or son Concretely, it is an act of generosity free of costs, but the fiscal reality is very different. This apparently altruistic decision without bad faith activates the machinery of the Tax Agency, applying a double tax burden. The regulations are clear and consider that to give something as a gift you first have to make it yours. Therefore, the Treasury interprets that if you name a beneficiary when you renounce, you have first accepted the inheritance and then donated it.
This mechanism is detailed in article 58.2 of the Inheritance and Donation Tax Regulations (available in this BOE), which establishes that in cases of resignation in favor of a specific person, the tax will be required from the renunciant. The text explains that this applies without prejudice to what must also be settled by the assignment or donation of the renounced part. The law does not see a rejection, but rather two different transmissions that occur in the same act and both must go through the checkout.
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In this way, the Treasury understands that the renunciant never stops being an heir in the eyes of paying taxes. By designating who your assets go to, you are exercising a power of disposition over them that only an owner has. The consequence is that the Tax Agency will first issue a settlement for the Inheritance Tax to the original renouncer and subsequently demand the Donations Tax from the final beneficiary, in other words, pay the tax twice.
The cost of confusing resignation with donation
On this issue, we must be clear about the nuance of “penalized kinship” that regulates article 58.1 of the aforementioned law. In a pure and simple renunciation, the renunciant steps aside and the inheritance passes to the next in the line of succession, paying a single tax, since he does not accept it. Now there is a technical risk that few know about and that is that if the person who resigns has a large prior asset, the Treasury could apply its multiplier coefficient to the beneficiary. This means that a wealthy family member who quits to help someone with fewer resources could be unintentionally increasing the latter’s tax bill.
We must also keep in mind the trap of community property detailed in article 58.4, since it is common that after the death of a spouse the widower or widower renounces their property to benefit the children. The regulations severely punish this by considering it a donation unless this renunciation had been formalized in a public deed before death, a provision that almost no one makes.
The strategy of waiting for the tax to expire before resigning is also not viable. Article 58.3 is categorical in establishing that any renunciation made after the tax has expired will be considered a donation for tax purposes. The legislator thus closes the door to any attempt to avoid the tax due to the mere passage of time, turning the wait into an additional tax burden.
A practical case of double taxation
Let’s imagine that Ana dies leaving an apartment to her son Pedro, but Pedro wants that home to be for his own daughter, Ana’s granddaughter. Pedro goes to the notary and renounces the inheritance “in favor of” his daughter. Pedro believes that this removes him from the equation, but the Treasury applies article 58.2 of the Regulation.
The Administration will demand the Inheritance Tax from Pedro for inheriting his mother’s apartment. Immediately afterwards he will demand the Donation Tax from Pedro’s daughter for receiving her father’s apartment. Pedro will have paid taxes for an apartment that he never lived in and his daughter will pay by donation instead of an inheritance. If Pedro had limited himself to accepting and his daughter to receiving, the cost would have been disproportionate, but the law assumes this fiscal fiction as there is a voluntary transfer of ownership.
The alternative of pure and simple resignation
To avoid this scenario, the only way contemplated by the regulations is repudiation or pure, simple and free renunciation regulated in article 58.1 of the Law. In this case, the beneficiaries pay taxes for the acquisition of the renounced part by applying the coefficient that corresponds to their pre-existing assets.
If Pedro had made a pure and simple renunciation, legally it would be considered that he never inherited. Pedro’s share would pass to the following forced or legitimate heirs according to the Civil Code. If her daughter were the next in line of succession by right of representation, she would receive the apartment directly from her grandmother Ana. In that case, only an Inheritance Tax would be paid calculated on the inheritance from the grandmother to the granddaughter, thus avoiding the feared multiplier effect of the gift tax.