Spanish donation tax
A donation or gift is a gift of assets owned by a person while he or she is alive, to another person without compensation. The beneficiary of the gift is required to file a return as well as pay gift tax. It is relatively common for parents to give money to their children to buy a home, and therefore the law specifically provides for a tax exemption.
Related article: Gift tax regime in Spain
The tax on donations in Spain is collected by the regional governments and therefore the rules vary from region to region.
You can visit the official website of the tax office of each region for information.
Official website of the Madrid Regional Tax Office
Official website of the Regional Tax Office of Catalonia
Regional Tax Office of Valencia
Official website of the Andalucía Regional Tax Office
Today we will take Madrid and Catalonia as examples.
Madrid: €250,000 tax exemption + additional 99% tax discount
In the Madrid region, there is a tax exemption of 250,000 euros for parents who pay for their children’s homes. Only the part that exceeds 250,000 is subject to tax.
To be entitled to the 250,000 tax exemption, the following conditions must be met:
-The amount granted, must be used to buy a house within 1 year. The property must be used as the child’s usual residence.
-A notary public certificate of gift needs to be signed at a notary public.
In addition, there is an additional 99% discount on the taxes to be paid, in addition to the 250,000 € tax exemption.
Example 1: A parent remits 250,000 Euros to a child for the purchase of a common residence without paying a single cent of tax. The children only need to declare it at the tax office.
Example 2: Parents remit 330,000 Euros to their children for the purchase of a common residence, of which 250,000 Euros is tax-free. The child only has to pay tax on the extra 80,000 euros.
According to the Madrid gift tax rate table, the taxable base of 80,000 euros would have been taxed at around 9,000 euros. However, after applying a 99% discount, only about 90€ of tax is actually due.
So as you can see, the gift tax in Madrid is very low.
Catalonia: 95% tax exemption, up to 60,000 euros
In Catalonia, there is also a tax exemption for parents who give money to their children to buy a house. However, the tax exemption rules are different from the way it is calculated.
Catalan law provides for a 95% exemption on the amount given, of which the maximum exemption is 60,000 euros. If the child has a disability, the maximum exemption is 120,000 euros.
To be entitled to the tax exemption, the following conditions must be met:
-The amount granted, must be used to buy a house within 3 months. The property must be used as the child’s usual residence.
-A notary public certificate of gift needs to be signed at a notary public.
-The children cannot be older than 36 years old.
-The taxable base of personal income tax for children cannot exceed 36,000 euros.
As you can see, the exemptions in Catalonia are not only lower, but the conditions are more demanding. Nevertheless, the tax rate in Catalonia will be slightly lower.
Example 1: If a parent remits 260,000 euros to a child for the purchase of a common residence, the maximum deduction is 60,000 euros, since 95% of the amount exceeds 60,000 euros. You will have to pay tax on the extra 200,000 Euros.
The taxable base of 200,000 is taxed at 5% as a donation from a close relative, so a tax of 10,000 Euros is required.
