Where taxpayers get caught out
A gift of a property with a large gain can trigger more tax for the donor than for the child receiving it. The full picture must be calculated before signing, not afterwards.
The taxes involved in a gift of property
| Tax | Who pays | On what |
|---|---|---|
| Gift tax | Recipient | Value of the property or money received |
| Income tax (capital gain) | Donor | Difference between value at gift and acquisition value |
| Plusvalía municipal | Recipient | Increase in land value, see the plusvalía guide |
Balearic reliefs
The Balearic Islands apply reduced rates and reliefs to gifts between close relatives, generally conditioned on the gift being formalised before a notary. Gifts of money must also be documented and the origin of the funds traced. As with inheritances, we apply the rules in force on the date of the gift.
The donor's capital gain
A gift is treated as a disposal for the donor's income tax. If the property has risen in value, the donor pays tax on the gain: at savings rates if resident, or at 19% if non-resident. See capital gains tax for non-residents.
Gifts from abroad and to non-residents
Non-resident recipients and donors can apply the regional rules of the place where the property is, as with inheritances. Gifts of money between people living abroad are generally outside Spanish gift tax, but a gift to a Spanish resident is not.
Gift or inheritance?
Sometimes waiting for the inheritance is cheaper, because inheritance does not trigger the donor's capital gain. Sometimes giving now is better. See inheritance tax in the Balearics, plusvalía and our inheritance and gift service.
An illustrative example
Based on situations we commonly see; not a specific client. A Swiss couple wanted to give their son the house in Pollença they had bought 25 years ago. The gift tax for the son would have been low, but the parents' capital gain was large. We compared it with keeping the house in the estate and they chose a partial gift of a share instead.
How Castell.tax can help
We guide foreign families through Spanish inheritances and gifts from start to finish: NIEs, the extension request, valuations, the Balearic tax return, plusvalía and the deeds, working with heirs in any country through powers of attorney. See our inheritance and gift tax service or contact us as soon as possible after a death, while all deadlines are still open.
This page is published by Castell.tax, the tax practice of Castell.law in Palma de Mallorca. It is general information; tax rules and rates change, so check your case with us before filing.
Not sure what you owe? Ask before the deadline
Send us your situation or the letter you received. A tax adviser will tell you what applies, what it could cost and what to file.
Frequently asked questions
Who pays gift tax?
The person receiving the gift.
Does the donor pay anything?
If property has risen in value, the donor pays income tax on the gain.
Must the gift be in a public deed?
To apply most Balearic reliefs, yes.
What is the deadline?
One month from the date of the gift.