Family Businesses: No 95% Tax Deduction if Shares Are Gifted by a Company—not an Individual

Spain’s tax authority (DGT) has confirmed in a June 5 2025 ruling that family businesses cannot apply the 95% deduction in Inheritance and Gift Tax (ISD) when the donor of company shares is a legal entity, such as a company—regardless of whether a family member controls that entity. The deduction only applies when the donor is a natural person. 

What You Need to Know

Who Can Qualify for the 95% Deduction?

To benefit from this generous tax reduction, three key conditions must be met:

1. The donor must be a natural person (individual), not a company.
2. The donor should be over 65 or incapacitated, and must stop executive duties without remuneration.
3. The recipient must hold the shares for at least 10 years and the shares must have been exempt from Wealth Tax during the donor’s lifetime. 
   
   

Why DGT Rejects Company Donors

The DGT emphasizes that the ISD law defines beneficiaries of this reduction as individuals—identified by relationship (spouse, descendants, adopted)—and sees no way to apply it when the donor is a corporate entity. 

Why the Law Matters for Family Succession

This interpretation has significant consequences for intergenerational planning:

• Share transfers from companies, even if controlled by the family, don’t qualify for the 95% reduction.
• The donor must be an individual to meet legal eligibility.
• Legal structures and planning must be carefully designed to preserve tax benefits.

Consulting firms warn that the rules are strict—and failing to comply can mean triggering full tax liabilities, not just the partial exemption normally available. 

How Taxadora Can Help

Planning the succession of a family business requires precision and strategy. Here’s how Taxadora can support you. While we do not assist directly with corporate transactions nor inheritance taxes we can help you with general questions regarding succession planning. We can also assist you with a tax simulation service where we can estimate your Spanish tax bill in the future after possible changes to your circumstances. 

With evolving legal interpretations and complex requirements, professional support is invaluable. Let Taxadora help you protect your legacy and plan smartly.

Final Thoughts

If you’re thinking of passing down your family business, or helping prepare a successor, note this crucial restriction: the 95% ISD reduction applies only when the donor is an individual—not a company. Given the higher stakes, thoughtful planning is essential.

For more guidance, head to our blog or reach out to Taxadora today for expert tax planning tailored to Spain’s family business laws.