One of the most common ways to transfer a property in Spain is to make a gift or donation. Through this operation, the ownership of a property is transferred for free to a person ( individual) or a legal entity, company. This operation can be very attractive if you want to put a property in the name of a family member or another person, and do not want to sell.
Although this process is not subject to Transfer Tax or VAT Tax, 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 assets are real estate property there is an obligation of the donor to pay Plusvalia Municipal Taxes, and if applicable Capital Gain Tax.
In today’s article we will focus on the Gift Tax.
Regarding the Gift Tax, the Autonomous Communities in Spain have the legislative power to regulate the tax benefits as they consider convenient. 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 different tax reductions between family members.
In first place, for gifts from parents to children under 21 years of age, who did not previously hold assets worth more than 600,000 euros, there is a reduction of 100,000 euros, to which 8,000 euros can be added for each year that the person receiving the property is under 21 years old, up to a limit of 156,000 euros.
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 have assets worth more than 600,000 euros, there is a tax reduction of 100,000 euros.
This reduction of 100,000 euros also applies between grandparents and grandchildren, although in this case there is an additional requirement for it to be allowed, that is that the father/mother must have passed away previously, which means that at the moment of granting the gift, 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 transferring or gifting a Spanish 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
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