Emily is British and has lived in Valencia since 2023. Her father, who lives in England, set up a discretionary trust in 2010 for his children and grandchildren, with two professional trustees in London. In March 2024 the trustees paid her €40,000 towards the deposit on a flat, and in June 2026 they transfer another €117,000. In the United Kingdom she has been told that the money "has already been taxed inside the trust". In Spain the question is a different one, and the answer does not come from any statute on trusts, because there is none.
Alongside her is Robert, an American resident in Madrid since 2025. He has a California revocable living trust of which he is settlor, trustee and beneficiary, holding a brokerage account worth about €800,000. He believes that, because the account is in the trust's name, it is not his for Spanish purposes. These are two very different trusts, and Spain looks at them very differently.
A legal figure Spanish law does not regulate
Spanish law has no trusts. Neither the Personal Income Tax Act (Law 35/2006), nor the inheritance and gift tax legislation, nor the wealth tax legislation contains a specific regime for them, and Spain is not a party to the Hague Convention on the law applicable to trusts. Where Spanish rules do name them is in reporting: the anti-money-laundering law treats as beneficial owners of trusts the settlor, the trustees, the protector if any and the beneficiaries; and the tax management regulations include in Modelo 720 securities contributed to trusts.
In practice, the trust is not treated as a taxpayer with taxes of its own. The Spanish tax authority looks through it and asks, at each point in time, who really owns the assets and when a genuine transfer of wealth from one person to another takes place. The Directorate General for Taxation has generally taken the view that the answer depends above all on two things: whether the settlor keeps control (the trust is revocable or the settlor can dispose of the assets) and whether the beneficiary has actually received anything.
Revocable or irrevocable: the distinction that shapes everything
| Situation | How it has generally been read in Spain | Main consequence |
|---|---|---|
| Revocable trust, settlor keeps control | No effective transfer: the assets still belong to the settlor | Income is declared in the settlor's income tax as if held directly; no gift on contribution |
| Irrevocable trust, contribution by a Spanish resident | The contribution may be seen as a gratuitous act, but the beneficiary has not yet received anything | Inheritance and gift tax has generally been placed at the moment the beneficiary effectively acquires |
| Distribution to a beneficiary resident in Spain | A gratuitous acquisition by the beneficiary, coming from the settlor, not the trustee | Inheritance and gift tax for the beneficiary: a gift if the settlor is alive, an inheritance if the settlor has died |
| Income the trust earns and does not distribute | Depends on the terms: settlor control, fixed rights of the beneficiary or full discretion | Case-by-case analysis; the tax authority has also examined whether a trust works as a pass-through entity |
For Robert, the most likely conclusion is the first row: he contributes, he manages and he can revoke. Dividends and gains on the account are declared in his Spanish income tax as though the account were in his own name, in the savings base. The account counts for his wealth tax if it exceeds the allowances, and being "in the trust's name" changes nothing. If Robert died while resident in Spain, what would matter is his estate, not the trust.
What Emily owes, step by step
Emily's father is alive, so each distribution is treated as a gift from her father to her, and the relationship that counts is hers with the settlor (daughter), not with the trustees, who are mere managers. Emily is resident in Spain, so she is taxed in Spain on a worldwide basis, on everything she receives, wherever the money sits.
- Which regional rules. Where the donor is not resident in Spain and the gift is money held abroad, a resident donee generally applies the rules of the region where they live. Emily lives in the Comunitat Valenciana, so its allowances and scale apply; we do not reproduce the figures here because they change. The allocation between regions is set out in the table of inheritance and gift tax competences.
- Value in euros. The transfer is made in pounds; it is converted at the exchange rate on the date Emily acquires, which is the date of the distribution. Here, €117,000.
- Aggregation. Article 30 of the inheritance and gift tax law treats gifts from the same donor to the same donee within three years as a single transfer. Between March 2024 and June 2026 there are fewer than three years, so the notional base used to find the rate is 40,000 + 117,000 = €157,000.
- Average rate. The tax that €157,000 would bear under the applicable scale is worked out and its average rate obtained. That average rate is applied only to the net taxable base of the current gift, the €117,000 after any reductions available. Result: the second distribution is taxed at a higher rate than if it stood alone.
- The 2024 distribution. If it was not declared at the time, it is outstanding and its own deadline has passed. It is better to regularise it before the tax authority asks.
- Tax paid abroad. If a similar tax was paid in the United Kingdom on the same increase in wealth, article 23 allows a credit for the lower of two amounts: what was paid there, or the Spanish average rate applied to that part. Whether what the trust paid there is similar in nature, and whether it relates to this increase, is for Emily's adviser in the United Kingdom to confirm; we do not give opinions on British law.
- Deadline. The gift is self-assessed on Modelo 651 within thirty working days of the acquisition.
What we said in the guide to cross-border inheritances and gifts applies here too: in many regions a close family relationship cuts the tax sharply, but that depends on formal requirements (sometimes a public deed or proof of where the money came from) that have to be met at the time, not afterwards.
"Already taxed" abroad is not deducted automatically. The fact that the trust has paid tax in its own country does not make the distribution exempt in Spain. At most it gives a right to a credit, and only if the foreign tax falls on the same increase in wealth. And watch the order of events: if the settlor is resident in Spain when contributing to an irrevocable trust, the analysis changes completely, and it should be done before the contribution, not after.
Modelo 720 when a trust is involved
The tax management regulations do not only ask who the formal owner is. For bank accounts abroad, article 42 bis requires reporting of accounts held in one's own name, or where one appears as representative, authorised person or beneficiary, or over which one has powers of disposal, and also by anyone who is a beneficial owner under the anti-money-laundering law. For securities and rights, article 42 ter refers to holders and to anyone treated as a beneficial owner, and expressly mentions securities contributed to trusts; for real estate, article 54 bis follows the same pattern.
| Person | Why they may have to report |
|---|---|
| Resident settlor (Robert) | Beneficial owner under the anti-money-laundering law; with a revocable trust, also the owner for tax purposes |
| Trustee resident in Spain | Powers of disposal over the accounts, and beneficial owner |
| Resident beneficiary (Emily) | Beneficial owner as beneficiary; for accounts, the rule also names beneficiaries |
| Resident protector | Beneficial owner under the anti-money-laundering law |
Appearing on this list does not mean always having to file: the thresholds and rules of each block still apply, as explained in the three blocks of Modelo 720. But it does mean that the beneficiary of a discretionary trust cannot assume Modelo 720 has nothing to do with them because they are not the holder. The value at which each asset is reported when a trust sits in between is one of the points best settled with the trustee's documents in hand. More on the form on our Modelo 720 page.
Documents to gather
- The trust deed and any amendments, including the revocation clause if there is one.
- The letter of wishes, if any, which is not binding but explains the settlor's intention.
- The identity of the settlor, trustees, protector and beneficiaries, and their tax residence.
- Statements of the trust's accounts at 31 December and the dates and amounts of each distribution.
- The returns the trust has filed in its own country and what it has paid there, certified by its adviser.
If the trust is American, the classification it receives under US rules (grantor or non-grantor trust, for instance) does not decide the Spanish one, but it helps to understand who controls what.
Where to start
With the trust deed, the statements and the dates of each distribution, we can analyse how each movement fits into income tax, inheritance and gift tax and Modelo 720, calculate what is due under the relevant region's rules and prepare the regularisation of anything missing. This work belongs to our inheritance and gift tax service, and the starting point is the inheritance and gift tax form. We give no opinion on the law of the trust's country: that is confirmed by the client's own adviser there, and we work from what they certify. We flag every risk, but the interpretation of the Spanish tax agency or the regional authority is not in our hands and we do not guarantee the outcome.
Related to this: the exit tax when you leave Spain, the exemption for work done abroad, relief for tax already paid abroad and controlled foreign company rules.