Family business: negative income from other economic activities does not enter the denominator of the 50%

The High Court of Justice of Catalonia, in its judgment no. 4794/2025 of 29 December 2025, confirms that the calculation of the 50% management-functions threshold required by article 4.Eight.Two.c) of the Net Wealth Tax Act (LIP) to access the family-business exemption must be carried out exclusively on positive income. Losses from other economic activities outside the entity for which the exemption is claimed are not integrated into the denominator of the calculation. The Spanish Supreme Court, by Order rejecting cassation of 12 November 2025, has consolidated this reading by refusing review of earlier judgments of the same Chamber that sustained the same criterion.

The practical consequence matters for the succession planning of family wealth. It is advisable to calculate tax period by tax period the 50% percentage by reference only to positive income, and to preserve contemporaneous documentation supporting that calculation —payslips with breakdown by entity, certificates from the company concerning the management functions and their remuneration, personal income tax returns for the tax period—. That documentation is the best defensive tool in case of administrative verification and also allows for an early assessment of whether the exemption effectively applies or whether the wealth structure should be reoriented before the chargeable event.

Full analysis in → Negative income from other economic activities is not computed in the 50% management-functions calculation under the family-business exemption