The family business: family protocol and generational handover with ISD reduction

The family protocol is the set of agreements signed by the partners united by family ties of an unlisted company to achieve a model of communication and consensus between family, property and business (art. 2 of RD 171/2007). It is not a closed official model: its content is left to the autonomy of the will, with the general limits of civil and corporate law, as recalled by the Directorate General for Legal Certainty and Public Faith.

A complete protocol usually regulates: the organs of the business family (family council, family assembly) and their relationship with the corporate organs; the conditions of entry of the next generation (training, external experience, merits); the dividend and reinvestment policy; the regime for the transfer of shares (pre-emptive acquisition rights, drag-along and tag-along clauses, known as drag along and tag along); the marriage settlements (capitulaciones matrimoniales) and wills aligned with the protocol; and a mediation system to resolve conflicts.

Among those who sign it, the protocol is binding like any agreement. Against the company and against third parties, only the rules that are also incorporated into the articles of association and registered deploy full effectiveness. That is why a serious protocol is almost always accompanied by a statutory reform.

The publication of the family protocol is always voluntary and only one protocol can be published per company (RD 171/2007, applicable to unlisted commercial companies). There are four ways: publishing it on the corporate website (art. 4), recording the simple existence of the protocol with its identifying data on the company's registry sheet (art. 5), depositing a total or partial certified copy (testimonio) of the deed together with the annual accounts (art. 6, which allows excluding confidential clauses), or registering the registrable corporate resolutions adopted in execution of a published protocol, with express mention of the protocol (art. 7).

It is advisable to know the limit: according to the doctrine of the Directorate General (resolution of 26 June 2018), the record, the deposit and the web publication are mere notice and are not protected by the public registry faith nor are they opposable to third parties. Only the registrable agreements of art. 7 (for example, the reform of the articles of association that incorporates the clauses of the protocol) enjoy full registry effects. Hence the importance of transferring to the articles of association what must bind everyone.

The application is submitted to the Commercial Registry of the registered office, with the public deed of the protocol, the current articles of association and the corresponding corporate resolutions. The registry qualification has a deadline of 15 days and accrues registry fees according to the registrable content. Managora drafts the application and submits it for you; you can see the updated amount in the procedure page.

The exemption of art. 4.Ocho of Ley 19/1991 (the Spanish Wealth Tax Act) is the key to the entire regime: without it there is no reduction in Inheritance and Gift Tax. For the individual company or professional business, it requires the owner to carry out the activity on a regular, personal and direct basis and for it to constitute their main source of income.

For shares in companies, three simultaneous conditions are required: first, that the entity carries out a real economic activity and does not have as its main activity the management of a movable or real estate wealth (wealth management is presumed if for more than 90 days of the financial year more than half of the assets are securities or unassigned elements); second, a participation of at least 5% individually or 20% jointly with the family group (spouse, ascendants, descendants or collaterals of the second degree); and third, that effective management functions are exercised with a remuneration that represents more than 50% of all business, professional and personal work returns. When the participation is joint, it is enough for one person in the kinship group to meet the remunerated management requirement.

Additional advantage in force in 2026: assets exempt in Wealth Tax are also exempt from the Temporary Solidarity Tax on Large Fortunes (art. 3.Cuatro of Ley 38/2022 (the Spanish Solidarity Tax Act)), which remains extended. A well-structured family business is left out of both wealth taxes.

In inheritance (art. 20.2.c of Ley 29/1987 (the Spanish Inheritance and Gift Tax Act)), the spouse, descendants or adoptees who receive the individual company, the professional business or shares exempt in Wealth Tax apply a 95% reduction of their value in the taxable base, with the commitment to maintain the acquisition during the ten years following the death. If there are no descendants, the reduction reaches ascendants, adopters and collaterals up to the third degree.

In a gift (art. 20.6 of the same law), the 95% reduction also requires the donor to be 65 years old or to be in absolute permanent disability or severe invalidity, and that, if they had been exercising management functions, they cease to exercise them and to receive remuneration for them. The donee must maintain what was acquired and keep the right to the exemption in Wealth Tax during the ten years following the deed, without carrying out acts of disposal that substantially reduce the value.

The well-executed gift has a second prize: the donor is not taxed in Personal Income Tax (IRPF) on the capital gain of the transfers covered by art. 20.6 (art. 33.3.c of Ley 35/2006 (the Spanish Personal Income Tax Act)), although the Directorate General of Taxes clarifies that the deferral only reaches the proportional part of the assets assigned to the activity.

Pay attention to your autonomous region: the 95% state reduction is the floor, not the ceiling. Many regions have improved it to higher percentages and some reduce the maintenance period. The rates and improvements change by region and by year, so no single figure is valid for all of Spain: it must be calculated with the competent regional rule in your specific case.

When the family group has several companies, the Directorate General of Taxes has admitted in numerous binding consultations (among others, V1507-19 or V2977-19) that organising the generational handover through a holding company and a family protocol constitutes a valid economic motive for the purposes of the tax neutrality regime for restructurings. It is a common piece of planning that Managora studies in each quote.

If within the maintenance period what was acquired is sold, the right to the exemption in Wealth Tax is lost (in gifts) or acts are carried out that substantially reduce the value, the reduction is lost: you will have to pay the part of the tax that was left unpaid plus late payment interest, through a complementary self-assessment.

In practice, three fronts must be monitored throughout the period: not transferring the shares or decapitalising the company; keeping the real economic activity (that the assets do not become mostly patrimonial); and, in gifts, that the family group continues to meet the participation and remunerated management. The state period is ten years, but several regions have lowered it in their own improvements: the one of the rule with which the reduction was applied applies.

Managora provides you, together with the execution of the handover, with a calendar of maintenance obligations so that no subsequent corporate movement costs you the benefit.

Managora covers the two pieces of the assignment. The first, the registry publication of the family protocol: we draft the application to the Commercial Registry at the level you choose (record, deposit or registration of agreements) and we submit it for you; the updated amount is in the procedure page.

The second, the tax planning of the generational handover: diagnosis of the structure, verification of the exemption in Wealth Tax, design of the transfer (gift or succession provision) and execution with the ISD reduction. This service is quoted: the work depends on the structure of your group of companies and the savings are decided by your autonomous region, so no serious professional can close a price for you or guarantee a percentage without seeing your case. We analyse your documentation and quote you in writing before you pay anything.

The whole process is online: you complete the questionnaire, sign the mandate and Managora prepares and submits each step before a notario (Spanish notary), the Commercial Registry and the competent Hacienda (the Spanish tax authority), and delivers the documents to you by email. Start today from the procedure page.