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Cash Gifts from Parents to Children Up 264% after Tax Cut in Murcia, Spain
In July 2015, the Autonomous Community of Murcia cut inheritance and gift taxes by 50% for parents, children and spouses, with spectacular results according to the latest data. Following the slashing of taxes on cash passed to children, there has been a recorded 264% increase in cash gifts made by parents eager to cash-in on the massive tax reduction.
The number of cash gifts or donations between parents and children grew by 264.7% last year and Spain’s Ministry of Finance have been quick to observe that ‘it is obvious that there is a cause-effect relationship and by lowering the tax, there is simply more incentive for live transfers’.
The community of Murcia, which until the last legislature had among the most burdensome inheritance rates in Spain, estimate the saving for Murcians amounted to €59m in 2016 although the decrease in tax collected was much lower.
The saving of 50% on inheritance tax and donations together with the existing bonus of 99% for transferring businesses on death to guarantee continuity of local economic activity amounted to a total of €59m in 2016. However, the income reduction for Murcia was much lower, only 16.9 million euros compared to the previous year.
Murcia Plans to Completely Abolish Inheritance Tax in the Future to Avoid Double Taxation
Murcia’s regional government increased the tax rebate in 2017 by raising the bonus for parents, children and spouses to 60% and extending the 99% deduction to special category families, although there is still no collection data available due to the six month filing period for returns..
In 2018, the executive’s commitment is to completely abolish inheritance tax, which means extending the succession of parents, children and spouses up to 99%.
Regional President Fernando López Miras commented: “It is unfair that our children pay for the assets that result from a lifetime’s work, when we paid tax when we acquired them. Our children have the right to enjoy the effort and sacrifice of their parents. It is a tax that penalizes those who save to give a better life to our children”.
In 2016, the value of property declared by inheritance in the region of Murcia rose from €1,007.5 to €1,121.3 million, representing an increasing over the year of around 30%. Although there may be more Murcians who declared very high incomes in 2016, officials think it more likely that there will be a greater predisposition among people to self-declare assets as a result of the tax cut.