A property in Mallorca, a financial contribution to the children, or the transfer of company shares: a gift is a common way to transfer assets during one’s lifetime.
However, anyone with ties to Spain—whether through residence or assets located there—must deal with the Spanish tax system. The Spanish gift tax, known as the “Impuesto sobre Sucesiones y Donaciones” (ISD), plays a central role in this context.
The challenge with this tax arises mainly from the significant differences between the individual autonomous communities. Some regions grant near-total exemptions for gifts between close relatives, while others impose substantial charges.
Content
- What is a gift tax and who pays it?
- When does a gift tax apply in Spain?
- How high is the gift tax and is it the same across Spain?
- Are there tax allowances and reductions?
- Hidden costs: The taxes that are often overlooked
- The double taxation trap: When Germany and Spain both step in
- Execution and strategic planning with Global Tax Saving
What is a gift tax and who pays it?
The gift tax is a levy on gratuitous transfers between living persons. This means that whenever assets change hands without compensation, this tax may apply.
A key difference from the German system lies in who is liable to pay the tax: in Spain, it is generally the recipient of the gift who must pay the gift tax. However, under certain circumstances, the donor can be held liable if the recipient fails to fulfil their tax obligation.
When does a gift tax apply in Spain?
Whether a gift is subject to Spanish taxation depends on the tax residency of the individuals involved and the location of the gifted asset.
For entrepreneurs and investors—such as those seeking residency in Spain via the Golden Visa or looking to benefit from tax schemes like the Beckham Law—accurately determining tax residency is a critical issue.
There are two main scenarios:
Scenario 1: The recipient is a tax resident in Spain
If the recipient of the gift is a tax resident in Spain (defined as spending more than 183 days per year in the country), they are subject to unlimited tax liability. This means they must pay Spanish gift tax on any assets received worldwide, regardless of where the assets are located or where the donor resides.
Scenario 2: The recipient is not a tax resident in Spain
If the recipient is not a resident in Spain, limited tax liability applies. Spanish gift tax is then only due on assets located within Spanish territory. A typical example is the gift of a holiday property in Spain from parents living in Germany to their children who also reside in Germany.
Wie hoch ist die Schenkungssteuer und ist sie in ganz Spanien gleich?
This is where the greatest complexity lies – and also the biggest potential for optimisation. There is a national regulation in place, but most of the 17 autonomous communities have replaced it with their own, usually more favourable, laws.
Thanks to a ruling by the European Court of Justice, non-residents from the EU can also choose to apply these regional regulations, provided the gift has a connection to the region (e.g. the location of the property).
The national regulation and a costly mistake
The national legislation is strict and applies when no regional rules are in effect. The tax rates are progressive, ranging from 7.65% to 34%, depending on the value of the gift.
A common and costly mistake is the assumption that there are national tax-free allowances. This is incorrect: under national Spanish law, there are no general personal allowances for gifts. Every transfer is subject to tax from the very first euro.
The regional tax havens
Some autonomous communities have virtually abolished gift tax for close relatives (Group I: children under 21; Group II: older children, spouses, parents):
- Balearic Islands (Mallorca, Ibiza): Since mid-2023, a 100% credit applies here, which is equivalent to a full exemption from tax.
- Canary Islands: A 99.9% tax credit is granted.
- Andalusia & Madrid: In these regions, there is a 99% tax credit on the tax liability.
The choice of residence or the location of a property can therefore reduce the tax burden from thousands of euros to virtually nothing. Our experts at Global Tax Saving analyse your situation and show how, through strategic location choices—such as when purchasing property in Spain—significant tax advantages can be achieved.
Are there tax allowances and reductions?
The real potential for savings lies in the laws of the 17 autonomous communities. These have the right to set their own, far more favourable, tax allowances and reductions.
The applicability of these regional laws depends—when it comes to property—on the location of the property, and for moveable assets (e.g. money), on the tax residency of the recipient. The level of benefits is primarily based on the degree of kinship, which is divided into four tax groups:
- Group I: Children and adopted children under the age of 21
- Group II: Children and adopted children over the age of 21, spouses, parents and grandparents
- Group III: Siblings, uncles, aunts, nieces and nephews
- Group IV: All others, including unmarried partners
Special reductions
In addition to general regional benefits, there are also special allowances for specific situations, though these are subject to strict conditions:
- Transfer of family businesses:
Under certain conditions—such as the age of the donor and the continuation of the business by the recipient—a reduction of the tax base by up to 95% may be granted.
- Gifts for specific purposes:
Some regions offer tax relief on cash gifts to children if the funds are used to purchase their first primary residence.
Hidden costs: The taxes that are often overlooked
A gift often triggers additional, significant tax liabilities that must be considered during planning. These include:
Income Tax for the Donor
For the donor, the gift is treated for tax purposes as a sale. They must pay income tax on the notional capital gain (the difference between the historical purchase price and the current value of the property). For non-residents, this is charged at a flat rate of 19%. This tax does not apply in the case of an inheritance, which often makes a gift more expensive in direct comparison.
Municipal capital gains tax (Plusvalía Municipal)
In addition to the gift tax, the recipient must pay the “Plusvalía Municipal” to the local council. This tax is levied on the increase in the value of the land since the last change of ownership.
The double taxation trap: When Germany and Spain both step in
For Germans with ties to Spain, this is one of the most critical issues. The clear answer: there is a real risk of double taxation.
The German-Spanish double taxation agreement (DTA) does not cover inheritance and gift tax. Germany taxes a gift if either the donor or the recipient is tax resident in Germany at the time of the gift.
So, if a father living in Germany gifts money to his daughter living in Spain, both tax systems apply. The tax paid in Spain can generally be offset against the German tax, but often not in full.
Especially dangerous is the “foreign assets” trap: if a person living in Germany gifts liquid assets (e.g. money from a Spanish bank account or securities), the German tax authorities often do not recognise these as “foreign assets”.
The result: the Spanish tax cannot be credited, leading to real, unavoidable double taxation.
Execution and strategic planning with Global Tax Saving
The execution of a gift involves strict formal requirements. For property, a Spanish notarial deed is mandatory. Another common mistake involves deadlines: the tax return (Modelo 651) must be submitted within just 30 working days after the gift—not six months, as is often wrongly assumed.
For entrepreneurs and internationally active individuals, it’s often about more than just a simple gift. It can be part of a broader strategy that includes setting up a company in Spain or international tax optimisation. We help you find the optimal structure for your gift, understand the tax implications in both countries, and ensure your asset transfer is legally secure and efficient.
At Global Tax Saving, you will receive advice from experienced lawyers who are members of their respective bar associations. This guarantees the expertise needed for complex asset transfers.
Book your express consultation now and avoid costly mistakes with the Spanish tax authorities.
