The parents live in Spain and want to help a son or daughter who has gone to work abroad. Or the other way round: the family is abroad and the person receiving lives here. In both cases the question is the same, and the answer, surprisingly, depends on something as physical as where the money has been. Not on where the gift deed is signed, nor on anyone's nationality.
Two questions, in this order
- Is tax due in Spain? That is decided by liability: personal liability if the recipient is resident in Spain, who is then taxed on everything received, wherever it comes from; or territorial liability if the recipient is not resident but the assets are here.
- Under which region's rules? That is decided by the connecting factor, which for money is the place where the money has been.
Skipping the order leads to pointless arguments. A gift from a French father to a daughter resident in Madrid is taxed in Spain even if the money never left France, because the person receiving it is a Spanish tax resident and the Impuesto sobre Sucesiones y Donaciones, Spain's inheritance and gift tax, falls on the acquisition, not on the outflow.
Money leaves a trail, and the trail is the connecting factor
When movable assets located in Spain are given to a recipient who does not live here, the regional rules that apply are those of the autonomous community (region) where the assets were located for the largest number of days in the five years immediately before, counted from date to date and ending on the day before the tax accrues. For money, "located" means the account where it sits: the branch, the town, the region.
If the funds have spent four years in an account opened at a branch in a particular region and only a few months in another, the first one wins. What has to be provable is the trail: a certificate from the bank naming the branch where the account was opened, statements covering the five years and, if money was moved between banks, the full chain. Moving the money to another account the month before the gift does not change the connecting factor, but it does raise an awkward question.
| Situation | Who receives | Rules that apply |
|---|---|---|
| Money in a Spanish account | Non-resident recipient | Those of the region where the account was held for the most days in the five years |
| Money in a Spanish account | Recipient resident in Spain | Those of the recipient's region of habitual residence |
| Money in a foreign account | Recipient resident in Spain | Those of the recipient's region of habitual residence |
| Property in Spain | Anyone | Those of the region where the property is located |
| Property abroad | Recipient resident in Spain | Those of the recipient's region of habitual residence |
This rule exists because an old discrimination was corrected. For years non-residents could only apply the state rules, which were far worse than those of any region. European and Spanish case law forced them to be put on an equal footing, and today the possibility of applying regional rules also reaches residents of third countries, outside the European Union and the European Economic Area.
The reliefs: what they are and what they are not
Several regions have approved reliefs (bonificaciones) that cut the tax on gifts between close relatives down to a tiny fraction; in some, the relief reaches 99 % for kinship groups I and II, that is, descendants, spouse and ascendants. The exact percentage, the group it covers and the formal conditions depend on each region and on the rules in force on the accrual date, which for a gift is the day the gift is made. We do not give percentages by region here, because they change from one year to the next and an out-of-date figure would do more harm than none at all.
What does stay constant is the kind of conditions that usually come with them:
- A public document. It is common for the gift to have to be made in a public deed before a notary for the relief to apply. A bank transfer with an email alongside is not enough.
- Origin of the funds. When money is given, the deed itself is usually required to state where it comes from, and the donor must be able to prove it. It is the condition that brings down the most reliefs.
- Proven relationship. The Spanish family book (libro de familia), birth or marriage certificates, translated and apostilled if they come from abroad.
- Filing on time. Some regions make the benefit conditional on filing within the regulatory deadline. Filing late brings more than a surcharge: it can cost the entire relief.
A bill relieved by 99 % is still a bill: the form has to be filed, the tax assessed and the remainder paid. Whoever fails to file because "nothing was coming out" loses the benefit and is left with the full debt if the region reviews the file. And in regions that require filing on time, that mistake cannot be put right afterwards.
Gifts are added together
Gifts between the same donor and the same recipient within three years, counted from the date of each one, are treated as a single transfer when the tax is assessed: the bases are added up and the resulting average rate is applied. And gifts made in the four years before the donor's death are added to the inheritance.
On a progressive scale this matters a great deal: three gifts of sixty thousand euros in three consecutive years are not taxed as three small transactions but as one of a hundred and eighty thousand. Where the relief is high the effect is diluted, but where there is none, or where the relationship is distant, it decides the outcome. Planning the timing of the payments is, here, the only variable that can legitimately be moved.
Family loan or gift: not the same thing, and it shows
Many families prefer to lend rather than give, especially when the relief does not reach the relationship involved. A loan between private individuals is not subject to inheritance and gift tax, because there is no intention to give, and in transfer tax (the Impuesto sobre Transmisiones Patrimoniales) the granting of loans is exempt, but it has to be declared by filing the relevant form with the competent region. Filing it is precisely what gives it a verifiable date.
The risk is recharacterisation. If the loan is not documented, sets no repayment date, is never repaid and leaves no bank trail of the instalments, the tax authorities may conclude that what took place was a disguised gift, with its tax, its interest and its penalty proceedings. What supports a family loan is the dull part: a signed contract with the date, amount, term and conditions; filing with the regional authority; traceable transfers in both directions; and consistency with both parties' income tax returns. When another country is involved, the document should also record the currency, the exchange rate applied and the account the money came from.
The other side: what happens in the donor's country
Spain taxes the recipient. Other countries tax the donor, or do not tax gifts at all, or treat them as income. That asymmetry produces two opposite scenarios: double taxation and a gap. For the first there is the deduction for international double taxation in article 23 of Ley 29/1987, the Inheritance and Gift Tax Act, which lets you subtract what was paid abroad, subject to a limit; the mechanism is in the international guide.
What we do not do is give opinions on the other country's law. If an adviser is needed there, the client appoints one and we coordinate with them: we check that the way they characterise the transaction fits the way it will be declared in Spain, and that the certificate of tax paid will serve for the deduction. Working the other way round, taking the foreign treatment for granted, is the quickest way to end up with two returns that contradict each other.
What the notary does not check for you
The gift deed proves the act, the date and the consent, and that is a lot. But the notary does not assess the tax, does not verify the connecting factor and does not check whether the conditions for the relief of the competent region are met. If the deed does not state what the regional rules require it to state (typically the origin of the funds and their trail), the benefit may be lost, and correcting it afterwards does not always work, because the conditions are measured on the accrual date. That is why the text of the deed is reviewed before signing, with the applicable rules at hand.
Before signing anything
- Establish who is tax resident where, with certificates, not impressions.
- Locate the money over the five-year period and gather the statements.
- Look at the rules of the region that results, as in force on the planned date of the gift.
- Check the formal conditions for the relief before going to the notary, not after.
- Count the filing deadline from the day of the gift: it is thirty working days, and they run out on their own. The deadlines guide explains it.
If the transaction is under way, write to us through the inheritance and gift form before the signing. Almost everything that can be arranged in an international gift is arranged beforehand; afterwards all that is left is to assess whatever has come out, and we cannot guarantee that a region will accept a connecting factor the evidence does not support.