The Spanish General Directorate of Taxes (DGT), in binding consultation V-0354-26, of 18 February 2026, has confirmed a criterion that puts pressure on traditional family-business planning through holding interposition: when the holding company exclusively assumes the management functions of the operating entity, the members of the family group who retain a direct shareholding in the operating entity cease to meet the requirement of exercising management functions “in the entity” set out in article 4.Ocho.Dos.c of the Wealth Tax Act. The consequence, read strictly and literally by the DGT, is the loss of the family-business exemption for those members.

The regulatory framework

Article 4.Ocho.Dos.c of Act 19/1991, of 6 June, on Wealth Tax (LIP), conditions the exemption of shareholdings in entities on the concurrence of three requirements. The one of interest here demands:

“That the taxpayer effectively exercises management functions in the entity, receiving for that a remuneration representing more than 50 per cent of the totality of his or her business, professional and personal employment income.”

The provision adds, in the second paragraph, the well-known rule of family-group computation: where the shareholding is held jointly with spouse, ascendants, descendants or collaterals up to the second degree, the exemption reaches all members of the group provided that the management functions and the indicated remuneration are exercised by at least one of the group members. This is the rule that, for decades, has allowed family businesses to organise themselves around a single remunerated executive —typically the founder or the eldest— while preserving the exemption for the rest of the shareholding family.

The case

The consultant holds 100 per cent of the shares of an operating entity, together with her mother and three siblings. The consultant exercises effective management functions in the operating entity with a remuneration exceeding 50 per cent of her total income. The remaining members of the family group hold their shares without exercising management functions.

A restructuring is contemplated: the consultant contributes her shares to a new holding company, wholly owned by her. After the operation, the holding becomes a shareholder of the operating entity and assumes the management functions over it. The consultant, in her new position, exercises management functions in the holding, not directly in the operating entity.

The question put to the DGT is twofold: does the consultant meet the requirement of article 4.Ocho.Dos.c LIP with respect to her shares in the holding? And do the remaining members of the family group meet the requirement with respect to their direct shareholdings in the operating entity, once management has become centralised in the holding?

The DGT’s reasoning

The DGT splits the answer into two planes.

Plane 1 — The consultant and her shares in the holding. The management-functions requirement is met as to the consultant with respect to her own holding, because the consultant effectively exercises those functions, receives remuneration for them, and the remuneration exceeds 50 per cent of her income. The exemption is preserved for that position.

Plane 2 — The rest of the family group and their direct shareholdings in the operating entity. Here the DGT adopts a strict reading of the provision. Article 4.Ocho.Dos.c requires the management functions to be exercised “in the entity” whose shares are sought to be exempted. Before the restructuring, that requirement was met as to the operating entity by the consultant herself, and, through group computation, projected onto the rest of the family group. After the restructuring, the management functions over the operating entity are exercised by the holding —a legal entity— and by the consultant through the holding. But the other family-group members continue to be direct holders of shares in the operating entity, and as to those direct shares, the requirement of exercising management functions in the operating entity is no longer met by any member of the group.

The DGT’s conclusion is direct: after the restructuring, only the consultant —who exercises effective management functions in the holding— retains the article 4.Ocho.Dos LIP exemption. The mother and the three siblings, who keep direct stakes in the operating entity, lose the exemption because the management is now exercised in the holding, not in the entity directly held by them.

Editor’s view

The DGT’s reading is literally defensible, but the practical effects are severe and worth contrasting with the functional logic of the regime.

First, an observation on the scope of the group computation. The second paragraph of article 4.Ocho.Dos.c LIP has been operating as a rule of projection of management functions among members of the group, not as a rigid rule of identification of the specific entity over which they are exercised. The DGT’s interpretation closes that projection to situations where each group member holds shares in the very entity over which management is exercised. It is a literal reading, but it leaves out functionally analogous situations that earlier doctrine handled with flexibility.

Second, on the purpose of the regime. The family-business exemption seeks to facilitate the continuity of family control of operating businesses. When a family holding centralises management for governance reasons —shareholders’ agreement, professionalisation, succession planning—, the economic substance of the family group remains unchanged. Denying the exemption to members retaining direct shareholdings in the operating entity, on the basis of a formal reading of “exercising management functions in the entity”, ends up penalising internal reorganisations that the legislator has not expressly excluded.

Third, on the interaction with recent case law. Spanish Supreme Court judgment 956/2025, of 14 July 2025, and the later STS 637/2026 and 640/2026, of February 2026, have embraced a functional interpretation of the family-business regime in another context —the full-time employee in rental groups— holding that the functional and economic integration of the group may satisfy requirements formally predicated on a specific entity. The DGT’s literal reading in V-0354-26 does nothing to qualify that functional line and, in my view, clashes with its logic. It is likely that an eventual appeal before the contentious-administrative courts will open a different route from the DGT’s.

The certainty conclusion, in light of current doctrine, is medium: the DGT’s position is the official one and, in an inspection, will be the criterion applied; the taxpayer who seeks to preserve the exemption for group members with direct shareholdings in the operating entity should be prepared to defend a functional alternative interpretation before the courts.

Practical consequences

For the family-business adviser considering a restructuring with holding interposition, V-0354-26 forces a recalibration on several fronts.

(i) Contribute to the holding the shares of all the group members, not only the executive’s. If after the operation all group members become indirect holders via the holding and the holding is the direct holder of the operating entity, the management functions exercised within the holding by one of the members are sufficient for the exemption to be preserved for the whole group as to their shares in the holding. This is the structure that the DGT considers safest.

(ii) If the family prefers to keep a direct stake in the operating entity for some member —for governance, voting or shareholders’-agreement reasons—, the V-0354-26 doctrine makes it advisable for each member with a direct shareholding to effectively exercise remunerated management functions in the operating entity, individually securing compliance with article 4.Ocho.Dos.c LIP. The group-computation rule loses, in this scenario, its practical utility under the DGT’s criterion.

(iii) Review structures already in place in which management of the operating entity has been centralised in the holding while other members of the family group retain direct shareholdings. The review is especially urgent when a significant taxable event is approaching —IP filing, gift or succession— and the loss of the exemption may crystallise in a significant liability.

(iv) Document effective management functions rigorously: board minutes, service contracts between operating entity and holding, specific remuneration for management functions distinct from profit participation. Inspections, before a holding-operating transaction, typically look for discrepancies between formal documentation and operational reality.

Sources

  • DGT, binding consultation V-0354-26, of 18/02/2026 (holding and loss of family-business exemption): link
  • Article 4.Ocho.Dos LIP — Act 19/1991, of 6 June, on Wealth Tax.