Gifting real estate in Spain
Spain – Balearic Islands – Canary Islands
When passing on real estate, it is also possible for the donor to bestow it onto the recipient as a gift while still being alive, or at the time of the donor’s death, instead of leaving the property as an inheritance. The former option usually offers the advantage that it is possible to avoid inheritance tax this way. Another advantage of gifting is that the conclusion of a contract offers a wider range of possibilities.
What you should know about gifting real estate
What Must a Gift Agreement Include?
A gift agreement must name both the donor and the beneficiary. Additionally, the gifted item must be clearly specified. If these minimum requirements are not met by the contract, the general statutory provisions on gifts will apply. The parties may agree on the following terms:
- Reservation of a lifelong usufruct or right of residence
- A Right of Revocation
- Special Conditions
- Special Obligations
Agreement of a Usufruct or Right of Residence
A reservation of a lifelong usufruct or a right of residence may be advisable, as the worth of the acquirer’s enrichment would thus be reduced, and, as a result, a reduction in gift tax would be possible. However, upon the death of the usufructuary, the taxation base will be revised in accordance with the actual residual value of the usufruct on the date of death. In this case, the residual value of the usufruct may be taxed retrospectively.
What Are the Tax Obligations?
In addition to the gift tax, a capital gains tax on the transfer of assets also applies. In Spain, all capital gains are generally taxed. When real estate is transferred, this tax is levied as a municipal capital gains tax (Plusvalía Municipal). It is imposed by the local municipality and is based on the official increase in the value of the land from the time of purchase to the time of transfer. The calculation is based on the cadastral value of the land, which is determined by the respective municipality. However, the tax will only be levied for a maximum period of 20 years.
Can German Gift Tax Also Apply to a Gift in Spain?
If the donor or the recipient reside in Germany, German gift tax will generally also be due. It is possible to avoid double taxation in whole or in part by offsetting the Spanish gift tax against the German gift tax. Tax credit in Germany is only granted in the case of unlimited gift tax liability in Germany.
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Att. Prof. (GTU / Georgien)
Dr. phil. Stephan J. Lang
Your specialist for inheritance law
Tel.: +49 (0)172 / 923 1838
When buying, building or selling a property in Spain, there are a number of legal and administrative hurdles that need to be overcome. We can help you.
Our direct contact person for you in Tenerife and Malaga is Mrs Svetlana Evgrafova.
She speaks German, English, Spanish and Russian and can also support you in emergencies.
Tel.: +49 (0)172 / 923 1838
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Find out now about the most important questions regarding the inheritance of real estate: When and how is the transfer to the heirs carried out? Can an inheritance in Spain also be subject to German inheritance tax?
Gifting a property
Find out now about the most important questions regarding the gifting of property: What must a gift agreement contain? What are the tax obligations?
Your specialist for inheritance law
Att. Prof. (GTU / Georgien) Dr. phil. Stephan J. Lang
- Lawyer and specialist in inheritance law
- Certified executor (AGT) and mediator
- Visiting professor at the GTU /Tbilisi/ Georgia (2013 - 2019)
- Member of the German-Spanish Lawyers' Association
- Registered office: Munich
- Area: Barcelona and Madrid
- Tel.: +49 (0)172 / 923 1838
Your contact for property in Tenerife and Malaga
Svetlana Evgrafova
Our direct point of contact for you in Tenerife is Ms Svetlana Evgrafova.
She speaks German, English, Spanish, Russian and can also support you in emergencies.
Tel.: +49 (0)172 / 923 1838