Support of the Supreme Court for the Tax Decision and the Central Administrative Economic Court
The Supreme Court has supported the decision of the Treasury and the Central Administrative Economic Court in relation to the taxation of donations in the income statement. This support refers to the possibility of compensating patrimonial losses in donations with other gains in the IRPF. This decision has important implications for the taxation of donations and has generated various interpretations depending on the case.
Implications for Donors and Beneficiaries
In the case of a house, shares of a fund or shares, the donee must submit the inheritance and donation tax, while the donor must do the same to the IRPF for the possible capital gain, as if he had sold them. This implies that donations can have significant tax implications for both the donor and the donee.
Interpretations of the Supreme Court and the TSJ of Valencia
The Supreme Court and the Superior Court of Justice of the Valencian Community have shown different interpretations on the taxation of donations. While the Supreme Court takes literally what article 33.5 c of the Income Tax Law says, the TSJ of Valencia has interpreted the term ‘debts’ by expanding its context. These interpretations have generated a debate on how to calculate the patrimonial gains or losses in onerous and lucrative transmissions.
Effects on the Income Statement
As a result of the ruling of the Supreme Court, a donation that is below the purchase value can no longer be imputed as a property loss on the income statement. However, it is necessary to impute as gain, and tax it, if the donation is above the value. This situation also affects the taxation of the sale of second-hand objects, such as a car, and requires special attention when submitting the income statement to the Tax Office.