The Supreme Court (Contentious-Administrative Chamber, Judgment No. 956/2025, of July 14) has resolved a key issue for the taxation of family businesses: the family business ISD reduction in cases of real estate leasing.
The question was whether, to apply the 95% reduction in Inheritance and Gift Tax (ISD) provided for in art. 20.2.c) LISD, it is sufficient to prove the requirements of art. 27.2 of the Personal Income Tax Law (premises assigned and full-time employee) or whether, in addition, it was necessary to justify the hiring from an economic point of view.
Background of the Case
- A family inherited 90% of the shares of an entity dedicated to real estate leasing.
- The heirs submitted the self-assessments of the ISD applying the reduction for family business – state rule: 95% (art. 20.2.c) LISD) – In the specific case, their self-assessment reflected 99%, in accordance with regional regulations.
- The Administration of Aragon and later the TEAR and the TSJ of Aragon rejected the application, arguing that the employee hired full-time did not have sufficient real workload.
- According to the Administration, the hiring was fictitious, since many tasks were outsourced and the real management barely required a few hours per month.
Doctrine Established by the Supreme Court on the Family Business ISD Reduction
The Supreme Court upholds the heirs’ appeal in cassation and establishes a clear doctrine:
To apply the 95% reduction in Inheritance Tax to family businesses leasing real estate, it is sufficient to prove compliance with the requirements of art. 27.2 LIRPF (existence of premises and full-time employee), without it being necessary to justify the hiring from an economic point of view.
In other words, the Supreme Court rejects the interpretation of the Administration and the TSJ of Aragon, which required an additional criterion of “economic reasonableness” not provided for in the Law.
Key Foundations of the Judgment
- Finalist interpretation: art. 20.2.c) LISD seeks to guarantee the continuity of the family business, preventing the tax burden of the ISD from forcing its liquidation.
- Legal certainty: requiring a subjective criterion of economic reasonableness would introduce uncertainty in taxpayers.
- Limited requirements: the legislator expressly set which are the minimums (premises + full-time employee). Once these are met, the leasing activity is considered an economic activity for tax purposes.
- Simulation: if the Administration suspects that a contract is fictitious, it must expressly declare it as a simulation, not distort the legal requirements.
Practical Consequences for the Family Business
- Clarity for family businesses: It will be enough to comply with the formal requirements of art. 27.2 LIRPF.
- Greater security in successions: the heirs may apply the 95% reduction in ISD if premises and a full-time employee are accredited.
- Limitation to the Administration: it cannot deny the benefit alleging lack of “sufficient workload” unless it proves a real simulation.
Conclusion on the Reduction in Successions
The STS 3472/2025 is a milestone in tax jurisprudence by reinforcing the protection of the family business in the Inheritance and Gift Tax.
The Supreme Court has made it clear that the 95% reduction in ISD is not conditioned to subjective economic valuations, but to the objective fulfillment of the legal requirements.
In Godia Asesores Tributarios we are specialists in taxation of family businesses and succession planning.
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