Tax benefits on gifts between family members

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GIFT TAX: If the gift is a real estate property there is also an obligation for the donor to pay Plusvalia Municipal Taxes. Photo: Shutterstock


IN Spain, one of the most common ways to transfer a property is to make a gift or endowment.

Through this operation, the ownership of a property is transferred free of certain taxes to a person (individual) or a legal entity or company.

Such a procedure can be very attractive if you want to put a property in the name of a family member or another person but do not want to sell it.

Although this process is not subject to Transfer Tax or VAT, you must be aware that it is subject to Gift Tax, which must be paid by the beneficiary, (i.e. the person who receives the assets) and if the gift is a real estate property there is also an obligation for the donor to pay Plusvalia Municipal Taxes, and if applicable, Capital Gains Tax.

In today’s article we will focus on Gift Tax

The Autonomous Communities in Spain have the legislative power to regulate the tax benefits as they consider appropriate.

This power has been used by the governments of several Autonomous Communities to establish tax benefits, mainly seeking tax relief for families by granting tax reductions to transfers made between family members.

In the Valencian Community, the Law 13/1997 of December 23 of the Generalitat Valenciana establishes in its Article 10.bis, a range of different tax reductions in respect of family members.

In the case or gifts from parents to children under 21 years of age, who did not previously hold assets valued at more than €600,000, there is a reduction of €100,000, to which €8,000 can be added for each year that the person receiving the property is under 21, up to a limit of €156,000.

For example, in the case of a father gifting an apartment to his 18-year-old son, the young man will not pay any amount of Gift Tax in respect of the first €124,000 of the apartment’s value,.

For gifts to children over 21 years of age and gifts from children to parents, provided that the person who receives the property did not previously hold assets worth more than €600,000, there is a straight reduction for tax calculation purposes of €100,000.

This amount of €100,000 also applies in respect of gifts between grandparents and grandchildren, although in this case there is an additional requirement for it to be allowed and that is the father/mother must be dead, so that at the time of granting, there should not be a living relative in the line of descendants or ascendants between the grandparent and the grandchildren.

These reductions have some limitations that need to be considered, as gifts made in the previous five years that come from the same person will be taken into account.

In addition, the reduction cannot be used when the person who transfers the property has enjoyed this same reduction in the last ten years.

If you are thinking of gifting a property to your children, grandchildren, parent or grandparents, or any other person, contact us and we will help you to do it in the most efficient way.

The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.

Carlos Baos (Lawyer)

White & Baos

Tel: +34 966 426 185

E-mail: [email protected]

White & Baos 2019- All Rights Reserved.

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