The Constitutional Court has dismissed this Wednesday the appeal against the taxation in the personal income tax of the so-called “inheritances in life”, that is, the assets that are received by virtue of succession agreements and contracts. The High Court, in a ruling for which Judge María Luisa Balaguer has been a rapporteur and which has had the dissenting vote of two judges, maintains that there is no double taxation since the taxable events are different in Personal Income Tax than in Tax Inheritance and Donations in this case. Specifically, the Xunta had appealed the provision of Law 11/2021, of July 9, on prevention measures and the fight against tax fraud because it precisely introduced the obligation to pay taxes on the capital gains (profit) obtained in this type of agreement. , if it was transmitted before five years or the death of the owner of the assets, if this was prior to this period.
Specifically, the appealed rule argued for this change in that succession agreements or contracts could be used to avoid taxing the capital gains that apply when an asset is transmitted while alive. For the Xunta de Galicia, this regulation was contrary to articles 31.1 and 9.3 of the Spanish Constitution, in addition to alleging that it supposes double taxation and that it treats transfers of goods unequally depending on whether the person making it has failed or not This, for the Galician autonomous government, violated the principle of equality and neither did it make sense that succession agreements or contracts pay tribute for a capital gain and do not do so after the death of the person transmitting. In addition, they maintained that a retroactivity was incurred contrary to article 9.3 of the Spanish Constitution.
With respect to the arguments in the appeal for which there is no difference between those who carry out this type of operation with the intention of avoiding taxes and those who do not, the Constitutional Court has reiterated its doctrine and pointed out that article 14 of the Spanish Constitution does not guarantee the right cho to unequal treatment. Then, with respect to typical inheritances, the High Court has registered that succession contracts have “effects in the present” and that this allows legislators not to apply the same tax treatment to them as property transfers due to death.
The “inheritances in life” in Galician law
The appeal presented by the Xunta de Galicia has its origin in the presence within Galician Civil Law of succession agreements and contracts (the “inheritances in life”), in the figure of “separation” which is nothing more than an agreement succession on the future inheritance by virtue of which a person (called “separant”) delivers certain assets while alive to one of his heirs (“separated”) in exchange for not inheriting him tomorrow.
Similarly, the Constitutional Court has rejected in its ruling the argument that the new regime is being applied retroactively. In this sense, it has argued that the income derived from the transmission of the property received by the “apartment” (the person who inherits the property) is generated when it is sold and must be taxed “according to the regulations currently in force”, not the one that was applicable at the time of its acquisition.
For their part, magistrates Enrique Arnaldo and Concepción Espejel, have formulated a dissenting vote in which they have considered that the appeal of unconstitutionality must be upheld because the contested regulation imposes arbitrary discrimination among taxpayers and does not notice any “objective and reasonable purpose that legitimizes the unequal treatment of equal situations”. He also does not believe that the figure of the Galician Foral Law of the “separation” can be equated with the donation inter vivos.
Both magistrates maintain that the first is not a donation but a succession agreement, even when it is formulated in an inter vivos contract, since the beneficiary receives certain assets but irrevocably renounces the legitimate interest that would have corresponded to him in the event of opening the succession. In addition, this also means discarding any request if the quantity of goods is subsequently increased.