Ius Transmissionis Civil and Tax Processing

The Right of transmission or the institution "ius transmissionis" is one whereby the hereditary rights of the deceased, without accepting or repudiating the inheritance, pass to their respective heirs.

It is a matter of elucidating on this point whether the application of art.1006 CC leads us to understand whether the transferee succeeds the originating predecessor directly (direct transmission theory) or whether double transmission occurs, from the originating predecessor to the transmitting party (second predecessor) and from this to the transferee (dual transmission theory).

Within the civil scope, the doctrine was clear. Judgment 539/2013, of 11 September, of the First Civil Chamber, of the Supreme Court, established that the property of the first predecessor’s inheritance passed directly from it to the transferee, i.e. there was one transmission.

In contrast, within the tax scope, up to June 2018, it was still understood that the property of the first predecessor was initially integrated in the estate of the transmitting party (second predecessor) to the estate of the transferee.

It was Judgment 936/2018, of 5 June 2018, of the Supreme Court’s Contentious-Administrative Chamber that changed the criterion within the tax scope and adopted the theory of direct transmission.

According to the new theory of direct transmission, the transferee (heir of the transferring party) does not acquire two inheritances but rather one, when considering that what both predecessors transmit is not an inheritance, but the entitlement to accept or reject it - ius delationis- therefore the first subsequently deceased heir has not been positioned in respect of the assumption of the inheritance of its predecessor, and consequently, only a single accrual of the Succession and Donation Tax [ISD] occurs.

Therefore, by the hereditary acquisition of the "ius delationis" the transferee acquires the entitlement to accept or repudiate the inheritance of the first predecessor, so that if it accepts it, it will become a direct heir and it must settle the Succession and Donations Tax for that inheritance separately from the inheritance of the transferring party (second predecessor), due to which it must also settle the Succession and Donations Tax, since, by only accepting the second, the right to accept or repudiate the first will be transmitted to it.

In this sense, the Catalan DGT [Dirección General de Tributos (General Tax Directorate)] welcomes the new interpretation of the SC-Contentious-Administrative Chamber in relation to the succession figure of the ius transmitsionis, a criterion that figures in the Resolutions 2/2018 on the processing of the entitlement of transmission at the ISD (September 2018) and 1/2019, supplementary of Resolution 2/2018 (August 2019).

However, the Catalan DGT establishes for these assumptions a surprising tax regime, arguing that until the death of the transferring party, (second predecessor) the entitlement to accept or repudiate the inheritance of the first predecessor is not conveyed to its heir.

The Catalan DGT’s argument is based on the LISD [Impuesto sobre Sucesiones y Donaciones (Law on Succession and Donation Tax)] Article 24.3, which regulates the effects of the acquisition of property whose effectiveness is suspended by the existence of a condition, term, trust or by any other restriction. Based on this, it first establishes that the statute of limitations of the entitlement to settle the Succession and Donation Tax for the acquisition of the first inheritance is not initiated until the death of the transferring party (second predecessor) occurs, i.e., it sets the commencement date of the statute of limitations period at the time of the acceptance of the inheritance of the transmitting party by the transferee.

Second, the Catalan DGT indicates that the tax regulation executable to the inheritance of the first predecessor will be the one in effect at the time of the death of the transmitting party (second predecessor). I must declare that I did not share this principle of the Catalan DGT, since the ius transmitsionis does not assume, to my understanding, any type of condition, term, trust or restriction that could suspend the acquisition of property under the terms of the LISD Article 24.3, and therefore amend the commencement of the statute of limitations period in the regulations.

On 20 December 2018, the Superior Court of Justice in Madrid handed down a judgment, with resolution number 905/2018, in which it applies the new SC criteria on ius tramissionis, concluding that the property of the first inheritance is not integrated into the second inheritance, but rather, the transferee acquires directly from the originating predecessor.

Notwithstanding, the most interesting thing about that judgment is not only that the Superior Court of Justice adopts the unique transmission criteria established by the SC, but that it is also established that the statute of limitations is counted from the death of the first predecessor. 

Against the Judgment of the Superior Court of Justice, a recourse for appeal was brought to the Supreme Court, which handed down a decision on 14 October 2019, dismissing the resource, for a lack of annulment interest.

In such a decision, the SC considers that the hereditary acquisition of the first inheritance occurs with the acceptance by the transferees, by computing the term, in any case, from the time of death of the first predecessor.

Following this decision of inadmissibility by the SC, there is no doubt that the correct interpretation is that the statute of limitations in these assumptions of the acquisition of the ius transmissionis must be counted from the death of the first predecessor, which results in the overturning of the criteria maintained by the Catalan DGT in Resolutions 2/2018 and 1/2019. In this situation, there is no option remaining for the Catalan DGT other than interpreting and considering that the statute of limitations of the first inheritance is not initiated until the death of the transferring party (second predecessor) occurs and the value of the property, the tax rate, the deductions and bonuses in this scenario, not those in force [sic].