We are glad to let you know that the 6th edition of the Newsletter of our network LEXUNION is now available.
It’s a free quarterly newsletter that deals with legal and tax developments in member countries of the Lexunion network, with the purpose to help french compagnies and persons clients of our network.
It can be downloaded on this link: Newsletter client – Lexunion 6-2016_EN FR
Donation of movable assets made outside Belgium – Usufruct/Bare ownership – Vlabel (Flemish Region)
With effect from 1 June 2016, Vlabel (the competent administration for registration and estate duties in the Flemish Region) considers donations of movable assets, embodying a separation between usufruct and bare ownership, signed in a country other than Belgium and on which no donation registration duty has been paid, no longer constitute discharge of estate duty, even if more than three years have elapsed between the donation and the donor’s death.
The administration’s position has come in for much criticism, and is not based on any real legal grounds. Nevertheless, we no longer advise our clients to make donations in the Netherlands or Switzerland with separation between usufruct and bare ownership if the donors are considered tax residents of Flanders (i.e. have been domiciled in Flanders for more than two and a half of the past five years) or if there is a possibility that they might die as residents of Flanders, even if they are not so resident at the time of the donation.
It is still possible for donations of full ownership subject for example to payment of rental to be made abroad, and these will grant discharge of estate duties providing the donor survives the donation by at least three years.
Inheritance by succession pact no longer to be taxed as an income tax in some regions of Spain
The Spanish Supreme Court Ruling of 9 February 2016 indicates that assets (real estate, stocks, etc.) inherited under a succession pact inter vivos (known in Galician law as apartación) are not subject to personal income tax (Impuesto sobre la Renta de las Personas Físicas or IRPF). Galicia’s apartación is very similar to certain agreements provided by the Balearic Civil Law, for instance known in Mallorca as the definition (“la définición”), and in Ibiza as the finiquito de legítima (literally “renunciation of legitimate inheritance”, but in effect a succession pact).
According to the Galician apartación, once the pact has been formalized and the inheritance declared opened, legitimate heirs and their descendants will be irrevocably excluded from the inheritance in exchange for the specific assets transferred to them. In other words the legitimate heirs acquire certain assets during the life of the donor in exchange for giving up their status as his/her heirs.
The Spanish Supreme Court has concluded that apartación as a succession pact, must be considered as a “lucrative transmission” mortis causa covered by Article 33.3.b of the Personal Income Tax Law.
This Supreme Court Ruling will have very considerable significance in all Spanish regions with their own Civil Law, including Catalonia (but not in the common Spanish Civil Law regions, where such pacts are prohibited). Residents of the Balearic Islands and Catalonia will be able to “die” from a tax point of view by making inter vivos donations to their heirs, with a very beneficial treatment of all taxes involved:
1/ The donor will be able to transfer assets (property, securities, stocks, etc.) at its actual value, during his life, and will not have to pay personal income tax on any profit arising from the transfer of properties if the transmission value is higher than its acquisition value.
2/ The donor will reduce his estate and therefore the tax payable on it. For example, if he/she transfers a property which is rented, he/she will reduce his/her income subject to personal income tax (his/her son’s income might be taxed at a reduced rate).
3/ The Inheritance Tax settled by the acquirer is usually less than that applicable to gifts, by acquiring assets at their current value, so that he/she could even sell them, for the same value, without any increase in personal income tax, soon afterwards.
4/ If there is a transfer of a urban real estate, in order to settle the increase of value for urban property tax, some city halls will take into consideration all tax benefits established for the inheritance.
Reform of Corporation Tax
Both houses of the Federal Assembly are putting the finishing touches to the corporation tax reform known as “RIE III”. This is taking place in the context of EU pressure for Switzerland to do away with special tax status for holding and domiciliary companies. These regimes will indeed be abolished, but this reform will also lead to sharp reductions in tax rates on profits of companies based in Switzerland at both federal and canton level. Other taxes such as stamp duty might also be eliminated. Once the law has been passed, the threat of a referendum brandished by the left will still hang over it. It is therefore unlikely to come into force any time soon. ■