Madrid's New Family Business Law: What It Means If You Own a Company in Spain
- Business Expats
- 20 hours ago
- 8 min read
On June 30, 2026, the Comunidad de Madrid published Ley 3/2026, de Apoyo a la Empresa Familiar. It took effect July 1, so if you're a founder or majority shareholder living in Madrid, it's already the law that applies to you.
Madrid just made it significantly cheaper and in some cases newly possible to pass a company to the next generation, or to someone outside the family who has run it for years. This isn't a one-off deduction you claim on a form. It's an estate-planning question: who ends up owning your company, when, and what it costs them to receive it. Here's what changed, who it actually helps, and three worked examples with real numbers, close to what we see with American founders relocating to Spain.
What actually changed
Spain's inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones, ISD) is a regional tax. Madrid has long offered a reduction on the taxable value of a family business passed on by inheritance or donation, so a business doesn't have to be sold or gutted just to cover the tax bill on its own transfer. Before this law, that reduction was 95% of the company's value. As of July 1, it's 99%.
That jump matters, but it's not the headline. Two other changes are:
Who qualifies got wider. The reduction used to be limited to close relatives:spouse, children, parents (Groups I and II in Spain's kinship classification). Now it reaches Group III (siblings, nieces and nephews, in-laws) and collaterals up to the fourth degree by blood or marriage, first cousins, essentially. That's a real shift for founders whose natural successor isn't a child, which is common among people who relocated as adults and whose kids have their own careers elsewhere.
Donating the business while you're still working got easier. Previously, if you wanted to gift the company to a successor during your lifetime rather than wait for it to pass through your estate, Spanish rules required you to be at least 65 (or permanently disabled) and to step down from any paid management role. Madrid dropped both requirements for its own reduction. You can now hand over shares while you're 50 and still running the place.
One thing this law doesn't touch: if your heirs are direct children or a spouse (Group I or II), Madrid has separately applied a 99% rebate on the tax bill itself since 2007, so most of what those heirs owed was already close to zero. This new reduction matters most for Group III relatives, who got a 50% rebate on the tax bill starting in 2025, and for people entirely outside the family, who get no rebate on the bill at all. For them, the 99% reduction on the business's value is the only relief available, and it's new.
The catch:
This only applies if you're a Madrid tax resident
This is regional law, not national law, and Spain decides which region's rules apply based on residency, not nationality or where the company is registered. For an inheritance, it's the deceased's habitual residence in the years before death. For a gift of shares, it's the recipient's habitual residence.
Concretely, for the American founders we work with:
On Beckham Law, living in Madrid: this is good news for you, not a workaround you need. To qualify for Beckham Law in the first place, you had to actually become a Spanish tax resident, that's a precondition of the regime, not something it grants you. Beckham Law (Article 93 of the Spanish income tax law) then lets you pay income tax as if you were a non-resident, at a flat rate on Spanish-source income. It doesn't touch your underlying residency status. The upshot: the same residency you already established to get Beckham's flat rate is exactly what Madrid checks to apply this family-business law. There's no separate residency test to pass, no extra waiting period beyond what Beckham Law already required of you. If you arrived recently on Beckham Law and are running a company in Madrid, this is the profile this law was largely written for, you're already in the door.
Off Beckham Law (standard resident), living in Madrid: same answer, applies to you the same way. Beckham Law status doesn't change eligibility either way.
Living in Spain but outside Madrid (Barcelona, Valencia, Andalucía, etc.): this specific law doesn't apply to you. Your region sets its own reduction and rate, and several regions offer something similar but not identical — worth checking separately.
Still living in the US, with a Spanish company you don't yet reside next to: more complicated. If neither you nor your intended successor is a Spanish tax resident, the state's default rules (not Madrid's) generally govern, and the calculus changes. This is exactly the kind of case that needs a residency review before you plan anything else.
Three examples
1. The founder gifting shares to a Madrid-based son, where the real cost hides
An American founder, on the Beckham Law regime, has run a Madrid-based consulting SL for six years. He's 54, and wants to gift 30% of the company (current value: €600,000) to his 28-year-old son, who works in the business, without waiting for an estate to settle. Before this law, gifting shares now would have required him to be 65 or disabled, and to stop drawing a management salary, Madrid has dropped both requirements, so the gift itself is now possible on his timeline.
On the Spanish gift tax side, this almost doesn't move the needle: Madrid has given children a 99% rebate on the tax bill since 2007, regardless of this new law, so his son's ISD bill lands somewhere between roughly €0 and €1,400 either way.
The real number is on the founder's side, and it's not in this law. If he gifts those shares while he's still under 65 and still drawing a salary as a manager, he doesn't qualify for the separate, state-level exemption that lets a donor skip capital gains tax on the appreciation embedded in a gifted business (Art. 33.3 of the Spanish income tax law), that exemption still requires the donor to be 65+ (or disabled) and to step back from management, and Madrid's law didn't touch it. If those shares were originally worth €50,000 and are now worth €600,000, that's a €550,000 gain. Taxed personally at Spain's savings-income rates (19% to 30%), that's roughly €147,000 in capital gains tax he'd owe out of pocket for gifting now instead of waiting. Madrid solved the Spanish gift tax problem; it didn't solve this one. That's a two-tax decision, and it's the kind of thing that needs to be modeled before the transfer, not after.
2. The founder whose heir is a nephew, not a child
A founder dies owning a Madrid-based company. The nephew who's been running it day-to-day (Group III no children of his own to inherit) receives a stake valued at €500,000, and meets the ownership and management conditions.
Before this law: Group III got zero family-business reduction, only a flat €8,000 personal reduction, and the 50% bill rebate introduced in 2025. On a €500,000 stake with a modest personal estate, that works out to roughly €86,000 in inheritance tax.
Under the new law: the 99% reduction on the business's value, stacked with the personal reduction, wipes out the taxable base almost entirely. Same nephew, same company, roughly €0 owed.
3. The founder whose successor is a longtime manager, not a relative
Some founders' natural successor is neither a child nor a niece, it's the person who has run operations for a decade. Say a manager with no blood relation to the founder, a contract in force, 12 years at the company and 5 years in an actual director role, inherits a 15% stake worth €300,000.
Before this law: no family-business reduction was available to someone outside the family at all, and Madrid gives no bill rebate to unrelated heirs (Group IV) either. With the steeper multiplier that applies to unrelated heirs, the tax bill on that stake runs roughly €111,000 over a third of what he received.
Under the new law, provided he meets the 10-year contract and 4-year management-role tests: the 99% reduction applies, and the bill drops to roughly €460. There's still no family rebate for him, but for the first time, this route is genuinely usable instead of theoretical.
(These three figures are worked using the published state ISD tariff and multiplier coefficients, assuming a modest pre-existing personal estate for each recipient and full compliance with the law's ownership, management, and 5-year holding requirements. They're illustrative, not a quote actual numbers depend on the valuation, what else is in the estate, and each person's specific situation.)
The part that doesn't have a treaty
If you're a US citizen or green card holder, don't assume paying Spanish gift or inheritance tax on the transfer settles things on the US side. Spain and the US have an income tax treaty, in force since 1990, that prevents double taxation on salaries, dividends, and the like. There is no equivalent treaty for estate and gift tax. Each country applies its own unilateral relief, the US has domestic rules that can credit foreign estate or gift tax against US estate/gift tax liability, and Spain has its own — but there's no coordinated treaty doing that work automatically. For a founder who's a dual filer, the Spanish side and the US side of a business transfer need to be planned together, not one after the other.
Where this leaves you
None of this is a single filing you complete and forget. It's a plan that touches your Spanish residency status, whether you're on Beckham Law or off it, how the company is structured (autónomo, negocio profesional, or sociedad), who you're actually planning to hand the business to, and if you're American, how the Spanish side reconciles with the US side, given there's no treaty doing that reconciliation for you. Get the sequencing wrong (donate too early, keep drawing a salary too long, misjudge your own residency) and you can lose the benefit this law was built to give you.
This is the kind of case Business Expats works on daily: relocating founders from the US to Spain and structuring what comes next, Beckham Law elections, autónomo vs. sociedad decisions, dual tax residency, and now, succession and gifting of the business itself.
Is Your Family Business Ready for the Next Generation?
Madrid's new Family Business Law creates significant opportunities for founders, entrepreneurs and internationally mobile business owners—but only when succession, taxation and residency are planned together.
At Business Expats, we help international entrepreneurs coordinate Spanish taxation, Beckham Law, corporate structuring and cross-border succession strategies before important decisions are made.
If you own a company in Spain—or are planning to relocate your business—this is an excellent time to review your long-term succession strategy.
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Frequently Asked Questions
What is Madrid's new Family Business Law?
Ley 3/2026 expands the tax benefits available when transferring qualifying family businesses by inheritance or gift, increasing the reduction from 95% to 99% and extending eligibility to more successors.
Can Beckham Law taxpayers benefit from this new legislation?
Yes. Individuals living in Madrid under the Beckham Law remain Spanish tax residents for these purposes and may qualify if the legal requirements are met.
Can I transfer my company before turning 65?
Madrid has removed the regional requirement to be over 65 or retire from management to benefit from its reduction for lifetime gifts, although other national tax consequences may still apply.
Does this law apply throughout Spain?
No. It is specific to the Comunidad de Madrid. Other autonomous communities maintain their own succession and gift tax rules.
Does this solve U.S. tax issues for American founders?
No. Spain and the United States do not have an estate and gift tax treaty, so cross-border planning remains essential.
Why should founders seek professional advice before transferring a business?
Because timing, residency, company structure, management roles and international tax rules can significantly affect the overall outcome.
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