Understanding gift tax in Spain

As we all know, time goes by and circumstances change. A common question our clients ask us is about gifting a property. If you own a property in Spain, you may wish to gift your home in Spain to someone else, either as a true gift or as a way to reduce inheritance expenses. In this article, we’ll explain gift tax in Spain, why it might be advantageous to gift a property as opposed to selling it or bequeathing it, and the general pros and cons involved. 

Defining a gift in legal terms

But in legal terms, what is a gift exactly? In Spanish law, we refer to this process as a donation. A donation is a gift of money or assets that is given to another person during your lifetime. This means that you are handing the property over to someone else who will be the person named on the Title Deed, and thus, become the owner of the house. 

Therefore, you want to make sure you give it someone you trust, like your children. This is because they will be responsible for the management of and decisions regarding the property. However, this does not mean you need to move out of your home; you can donate ownership but maintain usage. This is called ‘usufruct’, which is an arrangement that exists until an agreed time, usually until the occupant passes away.

Why donate a property instead of bequeathing it in a will? 

One of the main reasons we recommend gifting property is to avoid complications that may arise due to inheritance tax or disputes between your inheritors. By donating now, you can ensure your wishes are made clear. This will give you greater peace of mind, so you can feel more at ease. Furthermore, this process is more straightforward than the inheritance process, as less communication is needed. Hence, it is less expensive.

Another positive aspect is that under current legislation, you can take advantage of some donation tax reductions applicable to close family members. However, these vary according to your region. In some cases, gift tax in Spain could be 0 or close to 0. These allowances apply to close relatives, such as parents, children, grandparents or grandchildren, providing that they are European citizens, regardless of whether or not they are residents in Spain. 

If you intend to donate to a more distant family member or a person that isn’t related to you at all, then the amount of gift tax in Spain they can expect to pay will vary. This depends on several factors, including the property value and its location.

The donation process

To begin the donation process only a few documents are needed: the Title Deed, passports, NIE numbers if you have them, and a copy of the IBI bill or council tax. If you don’t wish to come to Spain to carry out this process or if this is difficult for you, you can easily grant a power of attorney. 

Once these documents have been gathered, it is necessary to sign these documents before a notary. Here, the estate registered in the name of the donor will be transferred to the beneficiary. As you can see, this is a quick and simple process that does not even require you to come to Spain.

Ask a trusted adviser about gift tax in Spain

Depending on the property’s value, its location and your relationship to the benefactor, it may be more or less beneficial to donate or bequeath. Therefore, make sure you contact your solicitor or us at Ábaco to calculate your gift tax in Spain.

We hope you have found this article informative and useful. If you would like more information, do not hesitate to contact us. Click here to fill in our form and one of our team will contact you to discuss your individual circumstances, without obligation.