Spain Explained

Making the decision – inheritance tax vs gift tax

Making sure your loved ones benefit from your hard-earned money is a priority for the majority. You can’t take it with you but it’s nice to have control over who you’re leaving it to.

For some, ‘gifting’ their property seems like the best option. It means the process can be completed during your lifetime and it doesn’t mean that you have to move out of your home. However, it does mean that you are no longer the legal owner and decisions about it will be made by those you donate it to. You need to consider carefully what the benefits and disadvantages are for you and your inheritors in the inheritance tax vs gift tax debate.

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Donating a house in Spain was, for many years, one of the most expensive ways of transferring a property. This changed in 2015 when due to a European resolution, Spain was obliged to apply the same fiscal advantages to residents and non residents of the EU.

Following Brexit this new advantage may be removed and the payment of donation tax for non-residents could, once more, mean a considerable drain on inheritors’ resources. A new consideration in the inheritance tax vs donation tax debate. With this in mind, some people are taking the decision now to gift their property and avoid excessive Spanish inheritance tax and donation tax in the future.

Every case is different, but here we have put together a couple of examples.

Case study 1: Parents donating their house in the Valencian Community

Mr and Mrs A have taken the decision to donate their house now to their two children rather than wait for the consequences of the Brexit vote. As things stand, their property is valued at around €200,000. They have taken this decision as currently their children will have no donation tax to pay.

Case study 2:Parents donating their house in the Murcia region to two children

Mrs. C has a house in Murcia. In this case there is something to pay as in Murcia there are no specific allowances for donation. Each child would have to pay €4,966.14  (total €9,932.28) on the property which is also valued at €200,000.

Inheritance tax vs gift tax post Brexit

In both of the cases we’ve outlined above, if the donation was made after Brexit or upon an inheritance transfer and legislation is reverted, then the cost of the donation or inheritance would be substantially higher.

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As non-members of the EU each child would have to pay €12,415.36 as there would be no allowances or reduction applicable. It is also important to note that these amounts would be payable (in total €24,830.72) before the house could be sold in the case of inheritance.

Therefore, if you are considering donating your property at some point in the future, and you are a UK national, then it is highly recommendable to proceed now to benefit from the EU tax advantages.

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8 comments

Peter Wells

24 June, 2019 8:54 am

Have read your article with
Have read your article with interest. However, could you please clarify a couple of points.
What is the gift tax rate in Andalusia?
How is the value of the property determined if it is being gifted?
Does the 3% additional tax that is applied to chattels as in the case of inheritance?
Kind Regards

Peter Wells

Suzanne O'Connell

1 July, 2019 7:26 pm

Hi Peter

Hi Peter

In Andalucia there is a bonification of 99% (only 1% is paid) of the total value donated. The value is determined by the town hall. There is a minimum value calculated on the basis of the rateable value. Percentages to be applied on the rateable value depend on the town hall. 3% is applied to inheritance but not to donation. 

Stephen Foakes

16 April, 2020 1:37 pm

So what is best , my father gets a solicitor and puts house in my name for a cost or does he sell it to me saying house is worth less then 200 Euro

Oscar Paoli

21 April, 2020 3:49 pm

Hi Stephen,
It will depend on your specific situation and taxation value of the property. In most cases a donation of a property may be a cheaper and easier process.
If you wish to receive more details please do not hesitate to contact us at ledaldpt@abacoadvisers.com
Kind regards,
Ábaco Advisers

pauline butler

13 August, 2020 1:03 pm

Hi firstly id like to say i dont know where to start.
My parents brought property in Malaga , since my father died . I have now just found out that there is inheritance tax to pay. My mother has a Spanish will and is wanting to sort everything out. Where do i start ?.

Oscar Paoli

13 August, 2020 1:17 pm

Hello Pauline,
Really sorry for your loss, I will have someone from our legal department to contact you directly with information on how to proceed.
With best regards,
Ábaco Advisers

Aase Bezzelt

9 September, 2020 2:24 pm

We have read your article about donation of property with great interest.

We are a married couple (age 78 and 74). We own a house in Calafell together with our son (age 48) – one third each.

Due to age and bad health, we want to donate our two thirds of the house to our son or to make a testament if this is a better solution. Can you give us a hint about what kind of taxes we and/or our son has to pay in connection with a donation?

When we bought the house in 2003 the valor cadastral was about 70.000 Euro. In 2018 it was about 77.000 Euro which is the latest information we have as we have not visited the house and the mailbox in the house for a long time.

Kind regards

Oscar Paoli

10 September, 2020 2:05 pm

Thank you for your message, we will have our legal department get back to you as soon as possible via email with information on how to proceed.

with kind regards,

Ábaco Advisers