Succession agreements in Galicia. The Pacto de Mejora as a legal transaction mortis causa

Abstract

Agreement as to succession ‘by improvement’ (pacto de mejora) and succession ‘by removal’ (pacto de apartación), as regulated by Law 2/2006 of 14 June on the Galician civil code, are two means for agreeing succession whose legal nature mortis causa has been disputed by the Regional Administrative Financial court of Galicia, the state Legal service and the Directorate-General for Taxation. Also a matter of dispute is their insertion in the tax framework, specifically, whether or not this kind of agreement is covered by the tax exemption provided for in Artículo 33.3.b) of Law 35/2006 of 28 November on personal income tax. This article analyses the pacto de mejora as a gratuitous, although subject to modus, legal transaction mortis causa, and, in particular, its tax implications, paying special attention to the jurisprudence of the supreme court of Galicia and the sentence of the supreme court of 9 February 2016.