Gift tax: how much you have to pay when you donate a home

Each Autonomous Community regulates this tax in a different way and the allowances are different.

Donations are not exempt from taxation and the tax that regulates them is the Inheritance and Donations Tax, which depends on each Autonomous Community. In the case of receiving a donation of a house, the rule that applies is that of the Autonomous Community where the house is located. If what is donated is money in cash to buy a flat, the rule that applies is that of the Autonomous Region in which the habitual residence of the donee is located (where they have spent the most days in the last five years prior to the donation), as lawyer José María Salcedo, partner of the Ático Jurídico law firm, reminds us. In order to calculate the tax payable by the beneficiary of the donation, it is essential to know the relationship between the donor and the donee, as well as the pre-existing assets of the beneficiary of the donation. For example, in most of the Autonomous Communities, donations between parents and children are subsidised or can benefit from reductions. Thus, the more distant the relationship, the more tax will have to be paid. For example, in the Community of Madrid, Inheritance and Gift Tax is reduced to 99% if the donation of a property is of the first degree of kinship (parents and children, for example). Another tax that the child or relative “rewarded” with a property will have to pay is the Municipal Capital Gains Tax. And this is unless, as the Ático Jurídico lawyer reminds us, it can be demonstrated that the value of the land is now lower than it was when the donor acquired it. It is a local tax, so it is each local council that establishes the applicable tax (which is calculated on the cadastral value of the land to which a coefficient is applied depending on the years in which the donor has had the flat and subsequently a rate is applied which, in no case, can be higher than 30%). In addition, the donee will also have to pay the Property Tax (IBI) in the future, as the owner of the property. However, the donor will also have to pay income tax, even though he has not sold the flat, but has given it as a gift to a relative. As far as personal income tax is concerned, if the difference between the acquisition value of the property and the actual value at the time of the donation results in a gain, this gain will be taxed in the donor’s personal income tax at the rate of 19%-23%, depending on the amount of the profit obtained. But if a loss is generated (because the current real value of the flat is lower than the acquisition value), then this loss cannot be included in the IRPF. However, José María Salcedo recalls that the TEAR of Valencia, in a recent ruling, has considered that such losses could be included in the personal income tax return, and offset against the gains obtained in the year, and in the following four years.

Community of Madrid

The donation of a home or any other property is subsidised at 99% when the beneficiary is a descendant (child, grandchild…), spouse or ascendant (parents, grandparents…) and adoptee. This means that you will only have to pay 1% of the Donation Tax. Let’s look at an example: A father donates to his son a property, located in the Community of Madrid, whose value is 200,000 euros. The son, who receives the donation, has to pay Gift Tax. Having made the appropriate calculations, he would pay a tax liability of 31,621.21 euros and, applying the rebate that the Community of Madrid has regulated since 01/01/2006, he would only pay 316.21 euros (1% of 31,621.21 euros). For donations that have taken place since 1 January 2019 between uncles and nephews and nieces (third degree collateral by blood) a 10% rebate on the Donations Tax will be applied.

And if the donation is between siblings, the bonus will be 15%.

Catalonia

In Catalonia, donations to descendants of a home that is their first or habitual residence or the donation of money for the purchase of a habitual residence are subsidised up to 95% of the value of the home or the amount donated, with a maximum reduction of 60,000 euros (this amount can reach 120,000 euros in the case of recipients with a level of disability equal to or greater than 65%). In the case of monetary donations, the reduction may be applied to donations made three months prior to the purchase of the house. The donee must meet the following requirements: The donation must be made in a public deed where it is stated that the destination of the donation is the habitual residence. In the case of donated money, the deed must be executed within a maximum period of one month from receipt of the money and the beneficiary cannot be over 36 years of age, unless he/she has a disability equal to or greater than 65%. In addition, the taxable base of the income tax return cannot be more than 36,000 euros. The donation of money does not benefit from any reduction.

Andalusia

In this autonomous community there is a reduction of 99% of the amounts donated to descendants for the purchase of the first habitual residence. The maximum reduction base is 120,000 euros for those under 35 years of age. And 180,000 euros for people with disabilities, with a degree of disability equal to or greater than 33%. There is also a reduction of 99% for the donation of a habitual residence to disabled descendants, with a maximum base for the reduction of 180,000 euros. On the other hand, if what is donated is directly a property, instead of money, then there is no reduction.

Balearic Islands

In this region there are two reductions related to housing, but they are incompatible with each other. The donation that is subsidised is that of a habitual residence. Thus, in the case of a donation of a property that will constitute the first habitual residence of the donee, verified in favour of children or descendants of the donor who are under 36 years of age or disabled, with a degree of physical or sensory disability equal to or greater than 65% or a degree of mental disability equal to or greater than 33%, a reduction of 57% is applied to the real value of said property, provided that the following requirements are met:

• That the donee acquires full ownership of the home.
• That the income of the donee in the year prior to the acquisition, in accordance with the calculation for Personal Income Tax purposes, does not exceed €18,000.
• That the real value of the property does not exceed €180,000.
• That the constructed surface area of the property acquired does not exceed 120 square metres.
• The recipient’s effective residence in the purchased home for at least three years from the date of acquisition.

In case the donation is money for the purchase of a permanent residence from parents to children or other descendants, the donee benefits from a reduction of 57% of the taxable base provided that the following requirements are met:

• The donation must be formalised in a public deed, in which it is stated that the money donated is to be used for the purchase of the first home of the child or descendant, which is to be his or her habitual residence.
• The donee must not be 36 years old on the date of formalisation of the donation.
• That the home is acquired within a maximum period of six months from the formalisation of the donation.
• That the pre-existing assets of the donee do not exceed 400,000 euros on the date of formalisation of the donation.

The maximum base for the reduction is 60,000 euros as a general rule, although in the event that the donee is disabled, this is increased to 90,000 euros.

Extremadura

In this region there are two types of reductions related to housing. On the one hand, there is a reduction of 99% of the amount of the donation of money for the purchase of a first home that will constitute the habitual residence of the donee: children and descendants, adults or emancipated minors. The limit is 122,000 euros. The requirements to be met are as follows requirements:

• The donation must be formalised in a public deed.
• That the public deed expressly states the intention to use the amounts donated for the purchase of the first principal residence.
• That the property is acquired within 6 months of the date of the donation.
• The property must be located in Extremadura.
• That the property remains in the estate of the donee for 5 years following its acquisition.
• That the pre-existing assets of the donee do not exceed 402,678.11 euros.
• For its effective application, it must be expressly requested in the regulatory period for filing the self-assessment or return.

If a home is donated directly (it must always be the beneficiary’s habitual residence), the reduction is also 99% of the net acquisition value of the home, with a limit of 122,000 euros. And the beneficiaries are again children and descendants, of legal age or emancipated minors. The requirements that must be met are:

• That the property is already built.
• That the public deed expressly states the intention to use the property as the first habitual residence of the donee.
• That full ownership is transferred.
• That it constitutes the first habitual residence of the donee.
• It must be a home located in Extremadura.
• That the property remains in the estate of the donee during the 5 years following its acquisition.
• That the pre-existing assets of the donee do not exceed 402,678.11 euros.
• For its effective application, it must be expressly requested in the regulatory period for filing the self-assessment or return.

Comunidad Valenciana

There is no tax relief, but a reduction in the tax base between parents and children and between grandparents and grandchildren, if the parent has died before the donation. If a house worth 250,000 euros is donated, a reduction of 100,000 euros is applied, so that the taxable base would be 150,000 euros and the gift tax is applied to this amount. If the property or the money donated is less than 100,000 euros, no gift tax is payable. This limit of 100,000 euros is cumulative over a period of 5 years. If the descendants are under 21 years of age, the reduction in the taxable base is 150,000 euros, plus 8,000 euros for each year that remains to reach the age of 21 (with a maximum reduction of 156,000 euros). If the recipient is disabled, the reduction can be 120,000 euros or 240,000 euros if the disability is equal to or greater than 65%. However, the following requirements must be met:

• That the donee has assets prior to the donation of up to 600,000 euros.
• That the donation is made in a public document (or is formalised in this way within the declaration period).
• When the donated goods consist of cash, the origin of the goods that the donor is transferring and the effective means by which the donated goods are delivered must be justified in the public document.
• That the delivery of the monetary amounts is made by credit or debit card, bank transfer, nominative cheque or deposit in accounts in credit institutions.

Castilla y León

The tax on donations is reduced by 99% provided that the acquirer is the spouse, descendant or adoptee of the donor and that the donation is formalised in a public document. Therefore, the person who receives a property as a donation will only pay 1% of the tax. In addition, if the donation is made in cash or in deposits, funds or accounts, the duly justified origin of the money in question must be stated.

Castilla-La Mancha

In this region, taxpayers (spouses, descendants or ascendants) can apply a rebate of 95% of the tax liability, in any case. But let’s look at it in more detail:

• Tax returns with a net taxable income of less than 120,000 euros, a rebate of 95% of the tax liability.
• Tax returns with a taxable base equal to or greater than 120,000 euros and less than 240,000 euros, a rebate of 90% of the tax liability.
• Tax returns with a taxable base equal to or greater than 240,000 euros, a rebate of 85% of the tax liability.

The requirements to be met are as follows:

• The transfer must be formalised in a public deed, which must expressly state the origin and location of the property transferred.
• The property must remain in the assets of the acquirer during the five years following the date on which the tax accrues.

There is also a 95% rebate when the donee has an accredited degree of disability equal to or greater than 65%. The same rebate percentage will be applied to contributions to protected estates for people with disabilities, as provided for in Law 41/2003.

Murcia

Taxpayers who have received by donation the full ownership of a property located in the Region of Murcia which is to be their main residence, or a cash donation for the acquisition or construction of their main residence, are entitled to a reduction of 99% on the real value of the property or the amount received, up to a limit of 150,000 euros. The excess that may occur in the real value of the property or in the cash donation over this amount is taxed at the fixed rate of 7%. However, it must meet the following requirements:

• That the donee is the spouse, descendant or adoptee and ascendants or adoptive parents.
• The donation and its destination must be formalised in a public document. In the case of a cash donation, this public document must state the origin of the funds donated.
• That the donee does not own another home at the time the public document is formalised.
• In the case of a monetary donation, the cash received must be applied to the purchase of the home within a maximum period of one year from the date of the first donation, or to the construction of the home within a maximum period of four years from the date of the first donation.

If what is being donated is land for the construction of a primary residence, the allowance is 99% of the real value, up to a limit of 50,000 euros. The excess that may occur in the real value of the plot over this amount is taxed at the fixed rate of 7%. However, the following requirements must be met:

• That the beneficiary is the spouse, descendants or adopted children and ascendants or adoptive parents.
• That the donation involves the acquisition of full ownership of the entire plot of land. If the donation is made to more than one taxpayer, each of them can apply the reduction on the proportional part acquired of the property.
• The donation and its destination must be formalised in a public document.
• The property must be built within a maximum period of four years from the date the public deed of donation is granted.
• That the taxpayer does not own another home at the time of the formalisation of the public deed of donation.

Canary Islands

In the Canary Islands , the donation of a habitual residence is 100% tax deductible, provided that the beneficiary is a disabled descendant or adoptee with a degree of disability equal to or greater than 65%.

La Rioja

The donation of a property intended as a primary residence benefits from a deduction in the tax liability, depending on the real value of the property. Up to 150,253 euros of property value the deduction is 100%, but from 150,253 euros to 180,304 euros the deduction is 80%. From 180,304.01 euros to 210,354 euros the deduction is 60%; from 210,354.01 euros to 240,405 euros the deduction is 40%; from 240,405.01 euros to 270,455 euros the deduction is 20%, and from 270,455.01 euros to 300,500 euros the deduction is 10%; and for more than 300,506 euros there is no deduction at all. If what is donated is money to buy a primary residence from parents to children, both must have been resident in La Rioja for the five years prior to making the donation. For this, the deduction is 100% of the tax.

Aragón

Donations in favour of children of money for the purchase of a first habitual residence or of a real estate property to be used as a first habitual residence, in any of the municipalities of the Autonomous Community of Aragon in both cases, shall entitle the donee to the application of a 100% reduction of the taxable base of the tax, in accordance with the following conditions:

Such a donation can be up to 250,000 euros without incurring tax. This is provided that the property acquired is within the Autonomous Community of Aragon. Furthermore, the pre-existing assets of the recipient of the donation must be less than 100,000 euros. In the case of a gift of money, the purchase of the property must take place in the period between twelve months prior to the gift and twelve months after the gift. And the property must belong to the donee for five years after the purchase.

Cantabria

The donation of a home that is the habitual residence of the donee, made to descendants and adopted children, is subsidised at 99% up to the first 200,000 euros of the real value of the donated home. On the other hand, in the case of a donation of land for the construction of a home that will be the habitual residence of the donee, the tax credit will also be 99%, but it is applied to the first 60,000 euros of the real value of the donated land. The donation of a home to a spouse or unmarried partner is also subsidised at 99%, up to the first 200,000 euros of the real value of the house donated. If what is donated is money for the purchase of a home by descendants, adopted or adopted children, spouses or common-law partners, it will be subsidised at 99%, up to a limit of 100,000 euros. In addition, and in the same cases, 99% of the tax liability is reduced, up to the first 30,000 euros, in the event that the cash donated is used for the purchase of land for the construction of a home that will be the habitual residence of the donee.

Asturias

The donation of money for the purchase of a home is subsidised at 95% if it is habitual for the donee, with a limit of 60,000 euros (120,000 euros if the beneficiary is disabled). This benefit can only be enjoyed by descendants of the donor under 35 years of age and must be formalised in a public deed. The home must be purchased six months before the accrual of Gift Tax. And the house must be owned by the donee for at least five years.

Galicia

In Galicia, the donation of money for the purchase of a primary residence in favour of children and descendants is subsidised at 95%, provided that the following requirements are met: the donee must be under 35 years of age, or a woman victim of gender violence. In the first case, it must be the purchase of their first habitual residence. In the second case, the recipient must not be the owner of another home. The amount of the donation must not exceed 60,000 euros. The descendant must purchase a home in Galicia within six months of the donation.

Navarra

In this Spanish region, donations to a spouse or stable partner are taxed at a reduced rate of 0.8%. For all other relationships, the rate varies from 0.8% to 8%.

Basque Country

Álava:

In this Basque province, the donation of a primary residence is subsidised at a rate of 95%, with a maximum limit of 212,242 euros, provided that the beneficiary has lived with the donor for the two years prior to the donation.

Vizcaya:

In this Basque province, the donation of a primary residence is subsidised at a rate of 95%, with a maximum limit of 212,242 euros, provided that the beneficiary has lived with the donor for the two years prior to the donation. This reduction only operates up to the amount established therein.

Guipúzcoa:

In this Basque province, the donation of a primary residence is subsidised at a rate of 95%, with a maximum limit of 207,112 euros, provided that the beneficiary has lived with the donor for the two years prior to the donation.

Source: Idealist.