One of the biggest worries for anyone who has built a family business is what happens the day the baton passes to the next generation. All too often, the tax bill on that transfer puts the very survival of the business at risk. The Region of Madrid has just approved a new law aimed precisely at easing that burden.
THE NEW FAMILY BUSINESS SUPPORT LAW
This is Law 3/2026 of 30 June, on Support for the Family Business, of the Region of Madrid. Its starting point is a recognition: the family business is an engine of wealth and job creation, and it deserves a legal framework that supports its continuity rather than penalising it at the most delicate moment —the generational handover.
To that end, the law improves the tax reliefs that apply to the transfer of a family business. Specifically, it introduces a new regional reduction in Inheritance and Gift Tax for the acquisition of assets and rights connected to an economic activity and of shareholdings in companies. In other words, when the business assets or the shares in the family company are transferred —by inheritance or gift— the base on which the tax is calculated can be reduced significantly.
WHAT THIS MEANS FOR YOUR BUSINESS
The core aim is to allow the generational handover to happen without tax costs that would make it unviable. For a business family, that translates into something very concrete: the ability to plan the succession —or bring it forward during one’s lifetime through a gift— with a far more reasonable tax burden, avoiding a situation where heirs have to strip capital from the business, or even sell part of it, just to pay the tax.
That said, these benefits are neither automatic nor unconditional. Family business relief comes with requirements: the activity must be a genuine economic one (not the mere holding of assets), ownership must be maintained for a set period, management functions must be exercised, shareholdings must qualify, and so on. A failure to meet these conditions can mean losing the relief entirely. This is why advance planning is decisive.
It’s also worth stressing that this is regional legislation: it applies in the Region of Madrid. If your business or your tax residence is in another region, the framework may differ —though the broader trend of strengthening the tax treatment of family businesses extends well beyond any single territory.
CLOSING
Preparing a generational handover is not something to improvise: the earlier you plan, the more options you have to do it well and make the most of the available tax reliefs. At EBF we support business families in designing their succession —in Madrid and beyond— so that the business passes to the next generation, not to the tax authorities. If you run a family business, let’s talk about your plan.