Does your family live in Spain? Beware of donations

Does your family live in Spain? And are you planning to donate to them? Be careful with this. Your family members may be taxed in Spain. This article will explain more about donating to a Spanish resident.

When does the beneficiary pay gift tax in Spain?

If your family members are tax resident or domiciled in Spain, they are subject to Spanish tax law. This means they will be taxed on worldwide gifts. An example.

Erik lives in Barcelona for work. He is registered in the population register there. Erik's father, Patrick, lives in Belgium. Patrick plans to gift 50,000 euros to Erik through a registered bank donation. Since Erik lives in Spain, he will have to declare this 50,000 euros to the Spanish tax authorities.

The effective tax payable depends on the autonomous region. Some regions, for example Andalusia, are more favourable than, say, Comunidad Valenciana or Catalonia.

Read more about the impact of emigrating to Spain on your taxes.

You donate Spanish goods

Regardless of the residence of the beneficiary, Spanish gift taxes are also due when you donate assets located in Spain. Usually we talk about real estate in Spain, but this rule also applies, for example, to the donation from Spanish bank accounts.

Find more information on gifting Spanish property here.

What about Flemish gift tax?

Flemish gift tax applies if the donor lives in Flanders at the time of the donation. In addition, you pay gift tax in Flanders on donations registered in Flanders. In practice, these are often notarised donations. But, for example, you also pay Flemish gift tax on registered bank donations. Since 15 December 2020, you must foreign notarised donation deeds mandatory registration in Belgium if the donation concerns movable property and the donor is a resident of Belgium.

Double taxation?

In practice, the beneficiary risks double taxation if he receives a gift registered in Flanders as a tax resident of Spain. In this situation, he pays the Flemish gift tax as well as the applicable Spanish gift tax. Spanish gift tax is regulated regionally. The rules therefore differ depending on the beneficiary's residence in Spain.

The other way around is also possible. In Andalusia, for example, there is a high exemption in gift tax provided this donation is notarised. If a parent, living in Flanders, makes a notarised donation to his child, living in Andalusia, the parties must have this deed of donation translated and registered in Belgium. The Flemish gift tax will then apply.

There is no treaty between Belgium and Spain to avoid double gift and inheritance taxes.

To get back to the example. In Flanders, Erik will pay 3% on the registered bank gift of 50,000. This is 1,500 euros. In Barcelona, Catalonia, Erik will pay the group II general rate (straight line older than 21 + partner) on a private donation. The first bracket here is 7% on €50,000 for private donations, making €3500. Total cost of donation: 5,000 euros or 10%.

Gifting to a Spanish resident can therefore result in double taxation. In the above example, we discussed a relatively small gift to one's own child. However, larger gifts or donations to other family members are taxed much more heavily, both in Flanders and Spain.

A man forewarned is worth two.

Do you have any questions about donating in Spain? If so, please feel free to contact on.

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