I inherited (or was gifted) the family business a few years ago and now I want to sell: do I lose the 95% inheritance tax relief, how much would I have to pay back, and should I wait?

Quick answer

Capittal's view: if you inherited or were gifted the business and applied the 95% relief under Spain's Inheritance and Gift Tax, selling before the holding period ends usually means losing that relief: you would have to pay the tax you saved plus late-payment interest. The period is ten years under the national rule, but several regions shorten it; in Catalonia it is five. Before signing anything, compare the cost of selling now with the cost of waiting, and check whether reinvesting the proceeds lets you keep the relief.

What exactly is the 95% relief I applied when I inherited?

Law 29/1987 on Inheritance and Gift Tax allows a 95% reduction in the value of a sole-proprietor business, a professional practice or shares in companies when they pass to a spouse or descendants (and, failing them, to ascendants and relatives up to the third degree). Article 20.2.c covers inheritances and article 20.6 covers lifetime gifts, provided the business meets the requirements for exemption from Wealth Tax.

It is not an unconditional gift from the tax authority: it is an incentive to keep the business in the family, which is why it comes with a holding commitment. Spain's regions can improve it, and many have, either by raising the percentage or by shortening the period.

How long do I have to keep the business before selling?

It depends on which rule was applied in your tax return. For inheritances it is usually the region where the deceased lived; for gifts it depends on the type of asset and where the recipient lives.

• National rule: ten years from the death or from the deed of gift, unless the recipient dies first.
• Catalonia (Law 19/2010): five years. For inheritances you must keep the activity and the assets, or replacement assets of equivalent value used in the business; for gifts of shares, you must keep them and continue performing management functions during that period.
• Other regions: several have their own periods or conditions. Check the rule in force on the date you acquired, not today's.

If I sell now, how much would I have to pay back?

The law is explicit: if the requirements are not met, you must pay the portion of tax left unpaid because of the relief, plus late-payment interest. This is usually regularised through a supplementary tax return; confirm deadlines and any surcharges with your tax adviser.

An illustrative example: if the business was valued at 4 million euros and the relief was 3.8 million, the tax is recalculated on that 3.8 million using the rates and regional allowances that apply to you. In regions with generous allowances for children the figure can be small; elsewhere it can eat a meaningful share of the price. Run the numbers with real data before negotiating.

Can I sell and keep the relief if I reinvest the money?

Under the national rule, Spain's Directorate General for Taxes takes the view that what must be maintained is the value of what you acquired, not necessarily the same shares. In binding rulings such as V2491-21 and V1579-25 it has accepted that, if the business is sold or wound up and the proceeds are reinvested maintaining that value, the relief is not lost. For gifts, the recipient also cannot carry out disposals or corporate transactions that substantially reduce the value acquired.

Regional rules can be stricter: Catalonia, for inheritances, requires the activity and the business use of the assets to continue, which makes it harder to sell to a third party and keep the relief.

Will I also pay capital gains tax when I sell?

Yes, these are two different taxes. If you inherited, your acquisition value for personal income tax is the value declared for inheritance tax (article 36 of the Personal Income Tax Law); if you sell soon at a similar price, the gain may be small.

If you were gifted the business with the article 20.6 relief, the donor was not taxed on the gain (article 33.3.c) and you take over their original acquisition value and date (article 36). The gain is measured from what your parents paid, which may be very little, and if the relief is lost there are recent court decisions debating who bears that tax. Model it before accepting an offer.

Should I wait until the period ends?

Often yes, but not always. Waiting makes sense if little time remains and the business is growing. It does not if a buyer has a specific window, if you cannot sustain the business for more years, or if the cost of regularising is lower than the risk of losing value. The usual middle-ground options are preparing the deal without committing to the transfer before the deadline, selling part now and the rest later, or reorganising ownership through a holding company with a genuine business purpose. None is automatic: all require prior tax analysis.

What does the buyer look at when they know I inherited recently?

The buyer does not inherit your inheritance tax issue, but they will spot it in due diligence and use it to read your timetable. If they know you need to close after a certain date, they may ask for long exclusivity or push on price. The sensible approach is to arrive with the tax timetable already worked out: deadline, cost of selling early and preferred structure.

What is the next step if I am thinking of selling?

Pull out your tax return, identify which rule and which period applied, and run three scenarios: sell now, sell when the period ends, and sell and reinvest. With those numbers, the decision stops being a gut feeling. This article is for guidance only and does not replace tax advice on your specific case; within the NRRO group we have tax and legal teams to review it.

Capittal Transacciones is an M&A mid-market boutique advising deals from 3 to 250 million euros from eight offices across Spain (Barcelona, Madrid, Girona, Lleida, Tarragona, Palma de Mallorca, Zaragoza, and Valencia), part of the NRRO group. A partner leads your deal from start to finish and works with you directly. If you want to know what your business is worth today and when it makes sense to sell, request a free and confidential valuation.