Rosa and Andrés, retired and living in Valencia, want to give their son Pablo the flat in Benimaclet that they bought in 2004, rather than leaving it to him later. They have run the numbers for Gift Tax and, with the reliefs that have been explained to them, the amount looks affordable. What nobody has put on the spreadsheet is the plusvalía municipal, the local tax on the increase in value of urban land. Pablo will have to pay it as soon as he signs, within a short period, and without the reduction the council may grant when the flat is inherited. In their case, the difference between giving now and inheriting later is measured in thousands of euros.
Who the taxpayer is in a gift
A gift is a transfer for no consideration. Article 106.1.a) of the consolidated text of the Local Government Finance Act (TRLRHL) makes the person who acquires the land the taxpayer: the recipient of the gift. Pablo is the one who pays, even though the initiative is his parents'.
The parents are not left out. Article 110.6.a) obliges the donor to notify the council that the transfer has taken place, within the same period the taxpayer has. It is a formal obligation, not an obligation to pay, but it exists.
The period is the one for transfers between living persons: thirty working days from the date of the deed of gift, under article 110.2.a). It is not six months, as with an inheritance. If the gift is signed at the beginning of November, the period ends around the middle of December, and somewhat later if there are public holidays in between.
The relief for inheritances does not reach gifts
Here is the cost that gets forgotten. Article 108.4 authorises councils to grant a relief of up to 95 % of the gross tax on transfers "made for no consideration on death" in favour of descendants, spouses and ascendants. The law does not include gifts in that paragraph. The only other relief in article 108 is for land with economic activities declared to be of special municipal interest, which does not fit a family home.
The result is that the same flat, with the same years of ownership and the same cadastral value, can cost the child very different amounts depending on whether it arrives by gift or by inheritance.
Pablo's figures, step by step
The 2026 bill for the IBI (the annual council property tax) for the Benimaclet flat shows a cadastral value of the land (the official value set by the Cadastre, Spain's property register for tax purposes) of 42,000 €. Rosa and Andrés bought in 2004: twenty-two years, so the bylaw's coefficient for the maximum period of twenty years applies.
- Objective base according to the council's simulator: 16,800 €.
- Gross tax resulting from the rate in the ordenanza fiscal, the council's tax bylaw: 4,200 €.
- If the flat were given: Pablo pays the 4,200 €, with no relief.
- If he inherited it and the council granted the legal maximum to descendants: 4,200 × 0.05 = 210 €.
- If he inherited it and the bylaw had no relief: 4,200 €, the same as with the gift.
Step 4 is a scenario, not a forecast: it depends on what the bylaw in force says when the last of the parents dies, which may be different from the current one. The cadastral value and the coefficients will also be different by then.
The three taxes a gift triggers
The municipal plusvalía is only one of the three taxes. It is worth looking at them together:
| Tax | Gift during life | Inheritance |
|---|---|---|
| Municipal plusvalía | The son pays it, without the relief in art. 108.4 | The son pays it, with the relief if the bylaw provides for it |
| The parents' IRPF (Spanish personal income tax) | The parents are taxed on the gain between their purchase and the value given | There is no gain: art. 33.3.b) of the IRPF Law excludes it on transfers on death |
| Inheritance and Gift Tax | The son is taxed on a gift, with the regional reliefs | The son is taxed on an inheritance, with the regional reliefs |
The income tax row often weighs more than the plusvalía. Rosa and Andrés bought for 96,000 € and the flat is worth about 230,000 € today. By giving it, they are taxed in their income tax on that difference, less the costs of the purchase and of the gift, as if they had sold it. If Pablo inherited it, that gain would disappear. The regional reliefs for gifts and for inheritances are different in each autonomous community and we do not quantify them here: the full comparison, with its nuances, is in does a gift during life pay less than an inheritance.
A good result in Gift Tax does not mean that giving works out cheaper. You have to add the son's municipal plusvalía without the relief and the parents' capital gain in their income tax, and compare that with what inheriting would cost under the conditions known today. Those conditions may change before the death, so neither option has a guaranteed outcome.
If the flat has not gained value
Non-liability under article 104.5 also applies to gifts. The transfer value taken is the one declared for Gift Tax, or the value checked by the authorities if that is higher, and the acquisition value is that of the parents' purchase. With the cadastral land proportion applied to both, you can see whether there is an increase. If there is none, Pablo does not pay, but he has to declare it and provide the deeds. And if there is an increase but it is lower than the objective base, he can ask to be taxed on the actual one, as we explain in objective or actual method.
Watch out for consistency: the value declared for Gift Tax serves at the same time for the plusvalía, for the parents' income tax and, in the future, as Pablo's acquisition cost. Declaring a low value in one tax has knock-on effects on the others.
Giving the bare ownership and keeping the life interest
Many parents give the bare ownership and keep the life interest (the usufructo, the right to use the property for life) so that they can go on living in the flat. For the plusvalía, that means two moments:
- on giving the bare ownership, Pablo is taxed on the part of the land value that corresponds to the bare ownership, calculated with the Transfer Tax rules to which article 107.2.b) refers;
- when the parents die, the life interest ends and full ownership comes together in Pablo; how that consolidation is treated for the plusvalía depends on how the life interest was set up and has to be reviewed case by case.
If you would like us to review the transaction before it is signed, you can send us the parents' purchase deed and the latest IBI bill with the plusvalía form. It is more useful before than after, because a signed gift cannot be undone to save tax: article 109.3 treats cancellation by mutual agreement as a new act that is itself taxable.
What Pablo carries forward
The plusvalía Pablo pays when he receives the flat is not lost. For income tax, the acquisition value of an asset received as a gift is the one that results from Gift Tax, to which article 35.1.b) of the IRPF Law, applied through article 36, allows the costs and taxes inherent in the acquisition paid by the acquirer to be added. If he ever sells, that plusvalía will reduce his gain. And for a future municipal plusvalía, the clock for the years of ownership starts running from the gift, not from the 2004 purchase.
The guide on plusvalía on inheritances and gifts sets out every case of transfer for no consideration, and the one on international gifts and reliefs is useful if any of the people involved lives outside Spain.
The Salama Tax page on the municipal plusvalía sets out the calculation for each type of transfer, including gifts where the donor keeps the life interest.