We have written before about the benefits of donating or ‘gifting’ your assets rather than bequeathing them when you die. ‘Donación de bienes’ is an alternative way of handing over your property which has a number of benefits. Arranging this handover sooner rather than later means you can be sure that you are avoiding inheritors having awkward arrangements to make when you should die. It can also be very beneficial cost-wise too.
Following an EU ruling, Spain had to bring its donation tax for non-residents in line with that of residents. As things stand at the moment, if a parent donates a property valued at €100,000 to their child in the Valencian Community, the Spanish donation tax would be €0. This is one example and it does depend upon where you are located and the relationship you have to those you wish to donate to. However, it represents a very good opportunity to reduce the amount of tax payable at handover. Particularly with Brexit on the horizon.
It is possible that when the UK leaves the EU, Spain reverts to its previous tax rules regarding donation and inheritance tax for British non-residents. This could mean the preferential rates currently available being removed and reverting to the level prior to the EU ruling. On a donation from parent to child of €100,000 that could mean a cost to the child of €12,415. A big difference.
If you take the decision to donate now, your children will be charged under the current arrangements. This removes any uncertainty from what the future cost to your inheritors might be when you die.
In January 2017 some amendments were made to Spanish donation tax laws that have led to people querying whether donating property is still a good option. It is true that there are some changes but they are small and should not be a deterrent to anyone considering donating their property now. The only real changes apply to inheritance worth more than €600,000 when the benefits to handing over property in this way diminish.
However, overall, donating your property in Spain still remains a good option and will enable people worried about the impact of the referendum to avoid the possibility of tax hikes following Britain’s exit from the EU.