I’m English, I have a house in Spain between Javea and Denia, valued about 195,000 €. I want to transfer this property to my 2 sons who live in the UK. I have been told that the best way is to gift it to them. Is that correct? What would be the tax to be paid?
Dear reader, thank you for your legal advice request.
As per the recent changes, it is true that the donation and gift is often the most tax efficient way to transfer a property in Spain to our family. Mainly because now the benefits of inheritance and gift tax, previously reserved for tax residents in Spain now apply to citizen’s tax resident in the European Union or the European Economic Area also.
But it is not always the case, as certain information that must be obtained and studied prior to making a gift, to see the real consequences of it.
1. Determine the value of the property to be donated. Donations and Gift tax to be paid depends on the value of the property. It is essential to calculate what is known as the minimum tax value, i.e. the minimum value that the tax authorities will consider acceptable.
2. Gift / donation Tax: As your children are living in a country of the European Union, they will benefit from the tax reductions foreseen in the Gift Tax Law of the Valencian Region, where the property is. These benefits are: a reduction of – 100,000€ (for each of them) on the value of asset donated, and a discount of -75% on the Gift Tax to be paid. In your case, as each child will receive half of the house, worth about 97,500€, there would not be Gift or Donations Tax to be paid.
3. Municipal Plusvalia: You must pay this local tax to the corresponding Town Hall, the amount of which will depend on the land value of the property donated, how long you have owned the property, etc.
4. Capital Gains Tax: This may be the most problematic tax. You should know that when there is a donation, the person who donates, although they are not receiving any money in return, must still pay capital gains tax, calculated by the difference between the purchase price (the price for which you bought, plus expenses) and the transfer value (the value given to the property in the donation – gift). Although it is possible that you should not pay this tax, if you are over 65 and you donate your habitual residency, etc.
Therefore, it is possible that a donation is the best way to transfer your property to your children, but you should make a study of the rest of tax payable, and the legal implications before making a decision .
If you have any questions on this matter, please contact us
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)
Spanish Law firm solicitor attorney barrister.
Alicante, Denia, Costa Blanca Marina Alta
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