Donating real estate in Spain is an alternative to inheritance, but allows you to receive and begin to manage the gift during the life of the donor. A gift is a voluntary gratuitous transfer of property from one person to another without any obligation to return the property received as a gift back. However, both parties, the donor and the recipient, are required to pay taxes. In addition, the donor must give his consent to accept the gift.

If movable property in Spain can be donated just like that, without any supporting documents, in extreme cases, with the execution of an agreement in simple written form, then the donation real estate in Spain must always be executed in the form of a notarial deed.

The donor has the right to stipulate additional conditions: for example, to retain usufruct – the right to use real estate, and in the case rental – the right to receive income. The gift is irrevocable, except in rare cases (for example, failure to comply with additional conditions).

Owners who have filed for bankruptcy and are in receivership are not allowed to donate their property.

How does the donation of real estate take place in Spain?

Before contacting a notary, you must request an extract from the Property Register – Nota Simple Informativa. This document will confirm, firstly, the ownership of the real estate property, and secondly, the absence of encumbrances and restrictions. It should also be remembered that the property being donated must not have outstanding taxes (IBI) or utility bills.

The act of donation, as well as the consent to accept real estate as a gift, are formalized by a notary and, as a rule, in a single document.

Both parties must appear before the notary, bringing with them identification documents, a deed of sale for the property, a recent extract from the Property Register, as well as the latest paid receipt for the IBI real estate tax. After signing the deed of donation, a new notarized deed of sale is issued, which records ownership.

Taxes when donating real estate in Spain

When donating real estate in Spain, an obligation to pay a number of taxes arises, both in relation to the donor and the recipient.

A person accepting real estate as a gift is required to pay two taxes:

• Municipal tax Plusvalía, which is calculated from the Valor de Referencia or from the value of the object recorded in the notarial deed, if this value exceeds the Valor de Referencia, or if the Valor de Referencia has not been assigned. The exception is agricultural land.
• Inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones), which is calculated according to a similar scheme. Management of this tax has been transferred to the regions, so rates, tax deductions and benefits are set locally: the choice of norm depends on the location of the property being donated. In many regions, the benefit in the case of gifts of real estate by parents to their children reaches 99% of the accrued tax amount (for example, in Andalusia, Madrid, Murcia, La Rioja).

Inheritance and gift taxes are calculated at the rates and paid in the autonomous community where the real estate property is located. However, there is an exception: if movable and immovable property are donated at the same time, and the total value of the movable property exceeds the value of the immovable property, the tax is calculated according to the rules of the autonomy where the donor lives. If several real estate objects located in different regions of Spain are given as a gift to one donor, the autonomy that accounts for the majority of the total value of the objects is selected for the calculation and payment of taxes.

Tax payment deadline: 30 calendar days from the date of signing the notarial deed. Some regions have their own deadlines.

The donor is required to declare the donated property and pay personal income tax (IRPF) if the value of the object at the time of transfer exceeded the cost of acquisition (the resulting positive difference serves as the taxable base). At the time of donation of real estate, the higher of two values ​​is taken into account: Valor de Referencia or the value indicated in the notarial deed. The cost of the acquisition is determined by the amount indicated in the bill of sale. The procedure is carried out as part of the annual tax campaign at rates from 19 to 26%. Taxpayers over 65 years of age who donate their primary residence, as well as taxpayers who retain a usufruct for life, are exempt from tax.

Inheritance and gift tax in Spain

Let’s take a closer look at this tax. Rates on it are calculated based on the degree of relationship between the donor and recipient. There are four groups of kinship ties in total:

• Group 1: children under 21 years of age, as well as other descendant relatives (grandchildren, great-grandchildren, etc. under 21 years of age).
• Group 2: spouses and registered cohabitants, children over 21 years of age, other descendant relatives (grandchildren, great-grandchildren, etc. under 21 years of age), parents and other ascending relatives.
• Group 3: collateral relatives of the 2nd degree (brothers and sisters), 3rd degree (aunts, uncles, nephews, nieces), relatives by marriage (children, grandchildren, great-grandchildren, etc. of the spouse/cohabitant).
• Group 4: collateral relatives of the 4th and other degrees (cousins), as well as non-relatives.

As we noted above, the regions are delegated the right to collect and manage this tax. However, at the state level there is a general scale of rates: some regions adhere to it, others apply their own.

According to the national progressive scale, the tax is calculated at rates from 7.65 to 34%, using increasing factors from 1.0 to 2.4, depending on the family relationship group. There is a large list of tax deductions and benefits both at the national level and at the autonomy level. The degree of relationship, the age of the donor, the status of the property (was the donor’s permanent home or will become the donor’s permanent home), etc. are taken into account.

Documents required to register a gift of real estate in Spain

The donation of real estate in Spain must be registered in the Property Register. The package of documents includes:

• A notarial deed of donation, which lists all the property being donated, and consent to accept the property as a gift;
• A new notarized bill of sale recording the transfer of ownership;
• Inheritance and gift tax payment receipt;
• Receipt for payment of Plusvalía municipal tax.

If for some reason the consent to accept the property as a gift was drawn up later than the notarial deed of donation, you will also need to confirm that at the time of registration of the consent the donor was alive.