Taxation on gifting property in Spain

Raymundo Larraín Nesbitt, July, 4. 2023

Lawyer Raymundo Larraín outlines the procedure to gift property (and money) in Spain attracting little to no tax.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 20 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

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By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of July 2023

Introduction

The continued (vertical) hike in interest rates pursued relentlessly by the ECB (basically to mend its own errors on printing money to no end during the Covid pandemic, which generated a huge inflation bubble) has continued to erode people’s income. In plain English, we are all poorer thanks to the errors of central banks. The good news is that no one in these central banks will be held accountable for their gross incompetence (not even a slap on their wrist), yay! The bad news is that all of us punters get to pay for central banker’s mistakes – as in literally. Nay!

The bottom line is that we are all now collectively poorer as a result of their gross negligence, and as a result many families are struggling to make ends meet as they are out-of-pocket with the rising cost of loans and life in general (inflation). This translates to loving parents lending a helping hand to their offspring, so they can get their paws on the first rung of the property ladder.

Gifting property

In today’s article, we outline a method so that parents – or other family members – support their children (or loved ones) financially so they can, for example, buy their first property. But it is also extensive to gifting properties between spouses, other family members, etc.

My professional experience is that most foreigners are blissfully unaware of the legal procedure involved on gifting property (or money) in Spain to their loved ones saving huge amounts in tax in the process.

Gifting property arises when:

Joint owners (i.e. spouses) decide to re-arrange property holdings.
When parents gift their property, or money, to their children.
When property owners gift their property to other family members, or friends.

Gifting property (or money) has indeed become very popular in Spain, as several regions have approved new tax laws that suppress inheritance and gift tax (Andalucia, Madrid, Galicia, etc). People are jumping at the chance of paying little to no tax in case these tax laws are changed again in the future when a new government takes power …

Taxes paid by the giftor:

Taxes paid by the giftee:

Gift tax (in several regions in Spain this is almost zero)

Additional expenses:

Lawyer’s fees
Notary fees
Land registry fees

Gift procedure

A lawyer needs to be retained from the outset to organize & supervise the gift deed which will be witnessed by a Spanish notary. This requires planning ahead carefully to mitigate your tax bill. If you fail to plan, you plan to fail.

If the legal procedure is not followed correctly (i.e. you do not bother to instruct a lawyer and attempt do it on your own), you will likely not qualify for the lenient tax breaks available and be slammed with a huge tax bill.

Please note we are only giving in this article a (very) basic outline on how the procedure works, the devil is in the details.

Dissolution of joint property ownership (DJPO)

If existing joint owners wish to re-arrange their property holdings, they can opt instead for a DJPO, which reduces taxes by as much as 86%, or more! More on this in our in-depth article: Dissolution of a joint property ownership.

A DJPO applies when:

1.- In divorce or separation proceedings. Couples owning property jointly may decide to split up. Taking for granted they own a property in equal shares, one of them decides to sell their 50% to his ex-partner. The ex-partner will pay him/her his quota.

2.- Re-arranging inheritances. Beneficiaries of an inheritance transfer their quota on a property to a fellow heir. E.g. Sisters who inherit property transfer a share between them.

3.- Re-arranging property holdings between family and friends. Stakeholders such as family, friends, or investors co-owning a property may decide to re-arrange their holdings.

Conclusion

If you care for your loved one’s well-being, and want to help them out in life, all the while paying little to no tax, you may wish to consider this option I explain above.

At LNA we will gladly assist you to re-arrange your property ownership by way of gifting it. Just give us a call, and one of our friendly staff will speak to you.

LNA offers this service: Gifting property & money

“If you fail to plan, you plan to fail.” – Benjamin Franklin

Benjamin Franklin (1706 – 1790). Founding Father of the United States. Exceptionally gifted statesman, scientist, inventor, diplomat, writer, printer, postmaster, and political theorist. He campaigned from early on for colonial unity, initially as an author and spokesman in London for several colonies. He was tasked to raise funds in Europe for the War of Independence. Malaga’s cathedral only has one tower (known as ‘La Manquita’), as the funds were gifted to 13 struggling colonies in their War for Independence against a mighty overseas empire. He was one of the drafters and signers of the Declaration of Independence of the 4^th July 1776. Appointed as the first United States ambassador to France, he exemplified the ingenuity and prowess of a young emerging American nation.

Benjamin was a politician in his spare time; nobody’s perfect.

At Larrain Nesbitt Abogados (LNA) we have over 20 years’ experience assisting clients buying, selling, or renting properties. We can also offer you a competitively priced accounting service to file your landlord taxes every tax quarter nationwide. We are also specialized in taxation, immigration & residency visas. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88, or by completing our contact form to book an appointment.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. VOV.

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