WE receive a number of enquiries concerning donations and gift of real estate properties in Spain, which are mainly made by parents to children, but also between spouses.
It can be complicated to understand the tax rules with regards to gift between tax residents, or expatriates and also between non-residents and foreigners in Spain.
The reasons for such gifts and transfers are many, but the most common are;
Sometimes the owners of the property are old and do not want or cannot continue with the care and maintenance of the property, or with the payment of the expenses, and decide to gift it to their relatives.
Another option is that expatriate owners, non- resident in Spain, want to pass the assets to their children to minimise the inheritance tax in their country of origin.
Another possibility that tax residents in the United Kingdom may want to make a gift of a property in Spain to relatives living in the United Kingdom prior to Brexit, as because Britain is still a member of the European Union, all the corresponding tax advantages will be applied to them, which probably it will not happen after British leaves the EU.
Tax aspects
When planning to make a gift or donation, the owner must take into account the value of the property, and what is the minimum tax value that will be accepted by the tax authority.
You have to calculate the gift tax to be paid, which will depend on the amount or value of the gift, the number of beneficiaries, the relationship between donor and recipient (e.g. children, spouses, cousins, friends etc.) as well as their tax residence.
It must also be in mind that in addition to the gift tax on based on the value of the gift there may be a liability for capital gains tax and municipal capital gain or plusvalia.
For these reasons, it is important that all aspects of potential tax liability are studied carefully before any action is taken.
Legal aspects
Clients who want to make such a donation need to be aware of the legal consequences of the gift, because after it has been made the former owner and donor will no longer own the property and will have no rights on it.
It could be possible for a conditional donation to be made, including a reversion pact, meaning that the property may return to the donor in certain cases.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
If you want to receive legal and tax advice about gifts in Spain, contact us and we will help you.
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: info@white-baos.com
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