The Supreme Court clarifies in two rulings (499/2020, from May 19 and 342/2020, from March 10) the concept of household goods in the inheritance tax and determines which assets should be included for the purpose of settling the Inheritance Tax (Article 15 of Law 29/1987 on Inheritance and Donations).

 

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What is considered household goods in an inheritance?

The household goods are part of the inheritance mass and are valued at 3%, unless proven otherwise, of the decedent’s estate (the decedent’s estate refers to the set of assets, rights, and obligations resulting from a person’s death, which constitutes their entire estate). However, interested parties can assign a higher value to these household goods, prove that their value is lower than the result of applying the percentage, or even prove their non-existence.

However, neither the Law nor the Inheritance and Donations Regulations specify which specific assets are included in household goods. To complete this concept, the Civil Code in Article 1321 states that household goods include goods such as “clothes, furniture, and utensils that make up the furnishings of the decedent’s habitual residence.”

 

Jurisprudence on Household Goods in an Inheritance

On the other hand, the jurisprudence of the Supreme Court has extended the concept of household goods to “personal and household effects, household utensils, and other movable property used by the decedent that were in their habitual home or elsewhere, with certain exceptions (jewels, vehicles, boats…).

Thus, referencing previous concepts, the Supreme Court now establishes a new doctrine and states that household goods encompass the set of movable property dedicated to the service of the family residence or the personal use of the decedent.

Once the concept is understood, the Supreme Court has set the criteria through the two rulings mentioned, regarding the valuation of household goods and how Article 15 of the ISD law should be interpreted.

 

Supreme Court’s criteria on household goods

First, we should remember that this content is informational; if you want to resolve doubts or clarify issues about inheritances, wills, and successions, you can contact our professionals without any commitment.
Back to the topic, the question is whether the 3% of the decedent’s estate includes all the assets in the inheritance or only those that may be dedicated to the personal or private use of the decedent. As we will see later, this percentage should only be applied to certain assets.

In this regard, the Supreme Court ruling leans toward the latter option and establishes that shares and corporate participations cannot be considered when applying the 3% to the decedent’s estate. If the taxpayer disagrees or is not satisfied with the final configuration of the household goods after applying the percentage, they can prove otherwise with all the legal instruments at their disposal. That is, there is the possibility to refute the presumption established in Article 15 of the ISD Law.

We could conclude by stating that the Court rules that the 3% should not include all the assets in the inheritance, but only those that can be affected by their function, value, and identity, to the use of the decedent.

Regarding real estate, income-generating assets, money, real estate properties, or any intangible assets, the Supreme Court adds that no proof is required by the taxpayer, as these are assets that clearly do not fall under the concept of household goods (“there are goods or rights that, clearly, with all evidence and in any case, would fall outside the scope of use for the family residence or the personal use,” as stated in the ruling TS 499/2020, from May 19).

 

What is the procedure for claiming undue payments?

After understanding these two rulings, many taxpayers will have the opportunity to recalculate the value of household goods declared in previously filed Inheritance Tax returns in order to request the rectification and refund of any undue payments that apply.
Therefore, the interpretation of the Supreme Court allows for reviewing the calculation of household goods made at the time and requesting a refund in case of overpayment.

The procedure for claiming undue payments would begin with a written request:

  • For self-assessments, there is a 4-year period from the end of the voluntary payment period (generally, 6 months from the date of death)
  • In the case of assessments, once they become final one month after issuance, the procedure is slightly different, and the real difficulty lies in the short claim period, after which only extraordinary appeal routes would be available, with limited chances of success.

If you want to resolve doubts or clarify issues about inheritances, wills, and successions, you can contact our professionals without any commitment.

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