CAN YOU DONATE A PROPERTY TO YOUR CHILDREN AND PAY NO TAXES IN ANDALUCIA?
Have you thought about donating your property to your children while you are alive?
Have you been told that donation costs are incredibly high?
Are you wondering if it is possible to donate paying hardly any tax?
Keep reading and discover the reality of this possibility.
PLEASE NOTE: I want to make clear, that at all times I am talking about Donations in Andalucía.
For other autonomous communities, send me an email at fran@afconsulting.es and I will be delighted to respond.
“Have you been told that donation costs are incredibly high?
Are you wondering if it is possible to donate paying hardly any tax?”
THE ADVANTAGES OF MAKING A LIVING DONATION
When you make a living donation, the property in question will be registered in the Land Registry in your children’s names, therefore avoiding the headache that inheritance would have given them.
If you don’t choose to go down the donation route and you wait for the inheritance to take place, they (your inheritors) will need more time before they are able to sell the property (this is due to the complex and time-consuming procedures of inheritance), whereas if the donation procedure has been completed, they can sell the property immediately, if they wish to do so.
And not only would they be able to sell faster, but the expenses would be far less than those of an inheritance procedure.
DISADVANTAGES OF MAKE A LIVING DONATION
Without a doubt, the main disadvantage is that the inheritors will be the owners of the property, so they could sell the property at any time without your permission.
It is clear, that we are talking about a question of having COMPLETE TRUST in your children.
PLEASE NOTE: Although, at all times, I am talking about children, keep in mind that this also applies to your spouse or common-law partner (be careful, it must an official partnership)
TAXES
In a donation, three main taxes come into play: Municipal Capital Gains, National Captial Gains and finally, Donation Tax, which is levied by the Autonomous Community where the property is, and in this case, Andalucía.
MUNICIPAL CAPITAL GAINS
This is a tax that is not commonly known about (I will soon publish a Post on the subject)
It is a Municipal tax, meaning that the Town Hall where the property is levies this tax.
It is payable every time a property changes hands (It doesn’t matter if it originates from a sale, donation or an inheritance)
The Town Hall charges for the alleged increase in value of the Urban land upon which the property is built.
Therefore, it is a tax levied on Urban land (not on Rustic property)
What is important: if the value of the donation is lower than the original purchase price of the property YOU DO NOT HAVE TO PAY THIS TAX.
PLEASE NOTE: In the inheritance procedure, ‘plusvalia’ Municipal Capital Gains, is also payable, but when doing the donation process the plusvalia tax is paid at that point. As plusvalia goes up with every year the house is owned, the donation process halts the tax and is paid at that moment. If one goes down the inheritance route the plusvalia is clocking up every year, until the inheritance takes place.
PLEASE NOTE: Although, at all times, I am talking about children, keep in mind that this also applies to your spouse or common-law partner (be careful, it must an official partnership)
CAPITAL GAINS
Like plusvalía, if there is a gain resulting from subtracting the donation value from the original purchase value (plus deductible expenses) it is taxed at 19% on the difference, for non-residents (which is a very similar figure for fiscal tax residents).
But if there has not been a GAIN, NO TAX IS PAYABLE (the loss has to be declared in a declaration that has to be filed, if this is the case).
DONATION TAX
In Andalucía, they introduced a bonification system for donations. If you don’t go over one million euros per person, the tax payable is only 1% of the 100% that would have corresponded before the bonification system was introduced in Andalucía (in other autonomous communities the full total is taxed)
For example, for a donation valued at 100.000€, in other communities that don’t have a bonification system, they would have to pay the sum of 15.645,36€.
Whereas in Andalucía, it would be 1% of that figure, which means just 156.45€.
OTHER EXPENSES
To the above taxes, you have to add the cost of the Notary, the Land Registry and Lawyer’s fees.
A REAL EXAMPLE: DONATION TO A SON VALUED AT 150.000€
Please note that the Notary and Land Registry fees are approximate figures.
NOTARY: 600-700€
DONATION TAX: 156.45€
LAND REGISTRY: 300€-400€
PLUSVALIA’ LOCAL CAPITAL GAINS & NATIONAL CAPITAL GAINS
If there is no profit, in other words, no financial gain, between the original purchase price and the donation value, NO TAX IS LEVIED (although a declaration stating this must be filed)
If you are considering the possibility of donating, click on the button below, and we will give you an approximate calculation.
Remember our MISSION STATEMENT: WE GUARANTEE YOU PEACE OF MIND & THESE AREN’T JUST WORDS
PS. Please ask any questions you may have. Contact us.
