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Taxes For Members

How much money can I give someone in Spain without it being taxed or declaring it?

The Local Spain
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How much money can I give someone in Spain without it being taxed or declaring it?
Whether someone is wealthy or rich in Germany depends on the yardstick used, but it might come in lower than some may think. Photo: Mathieu Stern/Unsplash

Gifting money at as a birthday present, at weddings, Christmas or as a 'loan' from the bank of Mum and Dad are all commonplace in Spain. But what are the rules on gift tax? How much can you give without having to declare it?

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In this age of financial uncertainty, it’s very common for family members to help each other out by giving each other money, whether that’s for something small like helping to pay the electricity bill one month or something big, like gifting money for a deposit on a house.

But is there a certain amount you can gift without the recipient being liable to pay tax on it?

Gift tax is levied on the increase of wealth because you received a donation from someone while they are still alive.

According to Section 618 of the Spanish Civil Code, “A donation is an act of liberality through which a person freely provides money or goods to the favour of another person, who in turn accepts". 

READ ALSO: How interest-free loans between family members work in Spain

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So how much can I give someone without it being taxed?

In short, if you give a gift to someone, no matter how big or how small, they must declare and pay tax on what they receive. Whether they’re a family member or a friend, they must still declare it.

Yes, even if you give someone €20 so they can take themselves out for dinner or a couple of drinks, technically they are liable to pay tax on it.

Many people believe tax only needs to be declared and paid on gifts above €3,000, but this isn’t in fact true. The Inland Revenue or Hacienda states that taxes must be paid whenever assets or money, including gifts, are given for free.

This idea comes from the fact that according to the Organisation of Consumers and Users (OCU), Spanish banks are only required to report the movement of money if it’s more than €3,000 or if someone uses a €500-euro bill.

In practice, however, most people don’t declare if someone gives them a gift of €20 and the Hacienda may turn a blind eye to these small amounts. They don't usually pursue tax from these relatively small gifts.

Technically though, you should be paying tax on these transfers and you should be aware that the Hacienda has the right to claim tax on any minor donations received over the last four years.  

Gift tax must be declared and paid within 30 days after the date you receive it. 

How much tax do I have to pay on a gift?

Gift tax in Spain is progressive, but the rates will depend on several different factors, these include:

  • The amount transferred to the beneficiary.
  • Whether the taxpayer is a Spanish resident.
  • If the taxpayer is a non-resident, whether they are an EU or non-EU citizen.
  • What region of Spain the recipient lives in.

Spain’s regions all have different rates, so if you give someone a gift who lives in Madrid they will end up paying an entirely different amount to someone who lives in Barcelona for example. 

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READ ALSO: What’s the inheritance tax in each region of Spain?

If the gift is a Spanish asset such as real estate located in Spain, they will be liable to pay tax on it, regardless of where the beneficiary lives. 

The amount of tax paid will also depend on your relationship with the donor of the gift. There are four different relationship groups. These are:

Group I: Natural and adopted children and other descendants (e.g. grandchildren, great-grandchildren) under 21.
Group 2: Natural and adopted children and other descendants aged 21 and over, parents and other ascendants (e.g. grandparents, great-grandparents), and spouses. 
Group 3: In-laws and their ascendants/descendants, step-children, siblings, cousins, nieces and nephews, aunts and uncles. 
Group 4: All others including unmarried partners even if they have registered as a pareja de hecho.

READ ALSO: Civil union or marriage in Spain: which one is better?

Depending on your situation, rates could vary from 7.65 percent for amounts below €8,000 and up to 34 percent for sums of money above €200,000.

It’s important to consult with a lawyer to find out how much you could be liable to pay or how much the recipient could be liable to pay, if you are the donor.

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What if I want to give my married children a gift to help them buy a home?

As young people these days are struggling to get on the property ladder, more and more parents are helping their children buy a house by giving them money for a deposit.

READ ALSO - Inheritance tax in Spain: Should you pass your property on to your children or sell it to them?

In this case, everything must be recorded before a notary so that the gifted amount is included as a private asset. Otherwise, it will be considered marital property.

When you donate money to your children for the purchase of a house, you can obtain a 95 percent reduction of the purchase value, but only if you meet the following requirements:

  • The money is used to buy a habitual residence after the donation.
  • It cannot exceed the maximum of €60,000 or double in the case of children with a 65 percent disability.
  • The gift must be made through a bank transaction between parents and children. The donation must be formalised in front of a notary by public deed.
  • From the date of donation, you must file the declaration within 30 business days and make the purchase within three months.  

Is there an alternative if I want to give someone money?

Yes, if you want to help someone out financially, but don’t want them to have to pay tax on your gift, then you can always give them an interest-free loan.

Loans between family members (or any other individuals) in Spain are governed by the same rules as those made by financial institutions.

Loans can be exempt from tax and interest, however, they must be formalised in order to avoid problems from the tax authorities.

In order to do this and for the recipient not to be taxed, you need to sign a document in front of a public notary stating the details of the loan – how much, when it should be repaid by and that it’s interest-free.

Remember, even if this is between family members, the contract is legally binding, so you must do whatever you feel is best. 

Experts recommend that repayments should be made by bank transfer, so there is a record that the borrowed money is being returned.

You will eventurally have to prove to the Hacienda that the money has been repaid so that you will not be liable to pay tax on it in the future. 

Remember to always get advice from a lawyer or professional financial advisor. The team at The Local Spain are not tax experts and have learned the hard way by getting on the phone and speaking with lawyers and tax agencies and reading through the applicable laws. 

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