B Law & Tax
23 May 2023

Tax advisor: Tax benefit for large family before the birth of the third child

A family with two children and the pregnant woman have obtained a favorable ruling by the Regional Economic Administrative Court (TEAR) of Madrid in their request to be recognized as a large family for the payment of the Transfer Tax and Stamp Duty (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados).

When acquiring a property, several taxes must be paid, including the Transfer Tax (Impuesto sobre Transmisiones Patrimoniales). In some autonomous communities, such as Madrid and Valencia, large families (with at least three children) can benefit from a reduced tax rate if they purchase a primary residence. In this particular case, the Community of Madrid incorrectly applied the normal tax rate of 6% instead of the reduced rate of 4% to which large families are entitled. The couple requested the autonomous community to correct the tax return and reimburse the amounts unduly paid, arguing that, as the woman was pregnant, the child conceived should be considered as born for all favorable effects.

The Court also considers Law 40/2003, which defines the concept of large family and its various categories as that formed by one or two ascendants with three or more children, whether or not they are common. This law establishes that large families are entitled to a series of tax benefits, including a tax reduction when acquiring a primary residence.

The resolution of the Regional Economic Administrative Court (TEAR) of Madrid refers to similar decisions made by other courts, such as that of Valencia, which hold that the “nasciturus” or unborn fetus, provided that the pregnancy ends in birth, is counted as an additional member when applying the tax benefits for large families. Therefore, families with two children and a pregnant woman, considering that the “nasciturus” is considered born for all favorable effects, will be able to settle the transfer tax at the reduced rate stipulated for large families.

B Law & Tax International Tax & Legal Advisors.


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