Correctly declaring a gift in Spain will not only help you avoid problems with the Tax Authorities. It will also enable you to benefit from significant bonuses and deductions under both state and/or regional regulations. In this week’s article, we discuss the most important aspects of gifts in Spain that both the donor (the person giving the gift) and the recipient (the person receiving the gift) should be aware of.
When should a Gift be declared in Spain?. Personal and Real Obligation.
In Spain, gifts are subject to Gift Tax. The obligation to declare a gift is based on two principles:
.- Personal obligation: If the recipient is tax resident in Spain, he/she is obliged to pay gift tax on the gifts received, regardless of whether the gifted assets are located (Spain or abroad).
.- Real obligation: If the gift consists of assets or rights located in Spain, it must be declared in Spain, even if the donor or recipient are Non-Residents.
Where is the Tax paid, and what Regulations apply?.
The applicable regulations and where gift tax must be paid depends on the international connection point.
If you are a tax resident in Spain and receive a gift (money or real estate located in Spain), the tax must be filed in the region where you reside, and the regulations of that region will apply. However, if the gift consists of real estate located outside Spain, the tax is settled before the Central Tax Administration (AEAT), and you can choose between state or regional regulations.
If you are Non-Resident, state regulations will always apply. If you receive a gift consisting of real estate, you may choose between state regulations or the regulations of the region where the property is located.
Tax Bonuses, Deductions, and Requirements.
Some regions in Spain offer very favourable bonuses for gifts between close family members. In the Valencian region, gifts between parents and children (or between grandparents and grandchildren) receive a 99% bonus. Additionally, the first 100.000€ are tax-exempt.
Suppose a father gives his child a property in Valencia worth 500.000€. The child would only pay tax on 400.000€. With the current 99% bonus, the tax payable would be less than 1.000€. In contrast, under the previous regulations, the tax payable would have been around 41.000€
However, bonuses and deductions are not automatic. Certain requirements must be met:
.- The gift must be formalized in a public deed signed before a Notary Public (not solicitor).
.- Also the relationship between the donor and recipient must be proven (birth certificates or family book).
.- The tax must be filed within 30 days of the gift.
.- All parties involved, even if both are non-residents, must have an NIE-NIF.
.- Etc.
Conclusions.
If you are going to receive a gift and do not formalize it with a public deed, the Tax Agency may require you to pay the full tax amount, without applying any bonuses. This could result in a very high tax burden, which could have been easily avoided with proper planning. At White-Baos Lawyers, we can help you plan your gift in Spain, ensuring you save significantly on taxes and benefit from available bonuses and deductions. Don’t hesitate to contact us today.
The information provided in this article does not constitute legal advice but is intended for general informational purposes only.
Carlos Baos (Lawyer)
White & Baos.
Tel: +34 966 426 185
E-mail: info@white-baos.com
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