What amount of money is considered a donation in Spain?
Everything you need to know about donations, restrictions, and the related laws.
6 min read
Many wonder if they’ll need to pay taxes on the money transfers or donations they receive. While it’s a common belief that taxes only need to be paid on money transfers over €3,000—in reality, all donations are taxable in Spain, no matter how small.In this handy guide, we’ll give you all the tools you need to understand taxes on gifts and donations so you can avoid any nasty surprises.
What is a donation?
According to Section 618 of the Spanish Civil Code, “A donation is an act of liberality through which a person freely provides money or goods to the favor of another person, who in turn accepts.” Effectively, this means that when a person or entity gives away an item of property or sum of money without receiving anything for it in return, it’s considered a donation in the eyes of Spanish law. Section 619 of the Spanish Civil Code also adds: “The transfer of assets to a person due to their merits or the services they provide to the donor is also considered a donation—as long as those assets do not constitute claimable debt, and the applicable taxes are lower than the value of the donated assets.”What’s more, the Spanish Internal Revenue Service (Hacienda) stipulates that taxes must be paid whenever assets or money (including gifts) are given for free. For goods, there are two types of donations:
Movables. Movable goods are those that can be easily transported from one place to another. According to Spanish law, movables can be donated verbally or in writing. If this is done verbally, the movable good needs to be handed over on the spot for the donation to be valid.
Immovables. These are goods that can’t be transported from one place to another—meaning they exist in a permanent location, and attempting to transport them would lead to damage or destruction. For donations of immovable goods to be valid, they need to be made in the presence of a notary after the signing of a public deed. In this kind of donation, the donor has the right to usufruct—meaning to use or enjoy—the donation if they choose.
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Hacienda considers any transfer of money or goods to be a donation, regardless of the amount or value. In fact, Spanish Civil Code doesn’t specify a minimum amount beyond which a transfer of money is considered a donation. So, according to Spanish law, if you were to pay your cousin back the €1.50 that she lent you to buy a soda at the movies, you’re technically donating money to her. The person that receives the money or goods then has to declare this donation as part of their Donation and Successions Tax Return, and pay the corresponding tax within one month. There’s a common belief that donations below €3,000 aren’t subject to taxation. This stems from the fact that in Spain, banks aren’t legally obliged to inform the treasury of cash withdrawals and deposits of less than €3,000. However, this doesn’t mean that you don’t have to pay tax on these transfers, or that the Spanish Public Tax Administration won’t find out that they’ve occurred. In fact, Hacienda has the right to claim tax on these amounts for up to four years after their transfer took place.
Taxes on donations
As we’ve explained, the recipient of a donation has to pay Successions and Donations tax once they’ve received money or goods. However, any earnings generated from the donation relative to the initial value of the goods are exempt from personal income tax (IRPF). This means that if a house accumulates value between when you received it and when the taxes are due, you won’t be taxed on those earnings. It’s important to note that not all of Spain’s states have the same legislation in this respect. But, as a general rule, donation tax rates vary from 7.65% for sums below €8,000 and 34% for amounts of money exceeding €200,000.What many people don’t know is that donors aren’t fully exempt from paying taxes when they make a donation. For example, as part of their IRPF, they’ll need to pay taxes on the difference between the acquisition value and the donation value. In the case of immovables, they’ll need to pay municipal capital gains taxes if the value of the real estate increases over a certain period of time.
Restrictions on donations
As you can imagine, there’s a huge number of laws and regulations that prevent us from lavishly donating money or goods. Here are the main restrictions you might face when you want to make a donation:
Donors can’t donate future goods, meaning that they have to donate goods or sums of money that already make up a part of their assets when the donation takes place.
They also can’t donate all of their goods, and they have to retain ownership—or the right to usufruct—with enough goods to assure a reasonable quality of life.
If the donor is in debt, the donation will be considered a fraud against creditors if the donor hasn’t reserved enough assets to settle their debts when the donation is made. In this case, creditors can go to court to apply for the donation to be rescinded through actio pauliana.
Donations cannot exceed the amount of money or goods that the donor stipulates in their will.
If a donation is made to several people at once, it must be divided equally among the recipients, unless the donor specifies otherwise.
Glossary of terms
Here are a few key terms to help you navigate the world of donations in Spain:Public deed—A notarial instrument used to substantiate a contract or legal procedure.Donation of immovables with usufruct—Here,the donor will cease to own the immovable goods, but will retain the right to use it, including any financial benefit received from the immovable goods, such as rent payments. The beneficiary becomes the owner of the goods, but won’t be able to use, rent, sell, or donate it until the usufruct period is complete. Usufruct—The right to use that which belongs to another person.Recipient—The person who receives a donation.Actio pauliana—An action by which creditors can nullify actions carried out by the debtor to their detriment.Municipal Capital Gains Tax—Atax applied locally in Spain that’s payable on the increase in value of urban real estate over time.
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