This is a question that many people ask, how to pass a property before death and the donation is usually an option to consider. While it should be noted that in Spain the number of inherited housing is much greater than donations, according to the National Statistics Institute. The main factor that tips the balance is the fiscal cost, which is different in each region.
Taxation is another important point to consider. In some regions (with jurisdiction over the inheritance and gift tax) gifts tend to be more burdensome for the purposes of inheritance taxation. These include bonuses, rebates and regional tax credits. In contrast, the donation are only some of these tax advantages. The beneficiary of the donation is who will have to pay, as in the case of inheritance, although with harder conditions. In addition, the donor must pay the income tax for the donation, since it is considered a lucrative transmission that can produce capital gains or losses.
In the case of acquisition of residence by inheritance, state law provides for a 95% reduction in the tax base on which the tax is calculated, up to a maximum amount of 122,606 euros. The Autonomous Communities may, in turn, increase this percentage, modify the limit and apply bonuses to the fee payable out. In the case of donations of residence, state law does not provide specific reductions, each region sets its rules. Are applied reductions in the tax base when it comes to regular housing or money is donated to the sons to buy their first home.
Each region has its own rules regarding inheritance and gift although in general, donations are “more burdensome for the purposes of taxation” that inheritances. The fact that donations prove generally more expensive than inheritances is that many regions do not include any bonus for this legal form, or submit its application only to certain situations and to certain amounts. In the case of the Balearic Islands, there is a reduction of 100% of the value of inherited property, with the limit of 180,000 euros per taxpayer. In the case of a donated house there is also reduction for children under 36 years old and with less equity to 400,000 euros: the reduction is 57% of the property value provided it does not exceed 180,000 euros and doesn’t have an area of over 120 m2.
Contact us if you need advice about this issue, our team offers judicial and extrajudicial representation and advice on matters relating to movable and/or immovable property, as well as specific areas of civil law as real estate law, family and inheritance law.