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It is increasingly common for parents to donate a property to one or more of their children, rather than waiting until inheritance, so that they can enjoy it while they are still alive. It is important to consider all aspects before formalizing this donation, both for the recipient and the donor:
Key aspects to consider
1. Formalization of the Donation
Since it involves Assets, the Donation must be formalized at a Notary by executing a Public Deed of Donation. In fact, this is one of the necessary requirements to qualify for the tax benefits available in some Autonomous Communities.
The done (who receives the Asset) will sign this Deed accepting the Donation so that it becomes effective and the transfer of the Property will be registered in the Property Registry.
2. Value to be declared
One of the most important points is to determine the value at which the Property will be donated, taking into account the minimum values established by the regulations in order to avoid the risk of having value checks by the Administration in the future, which could claim payment of a tax on a taxable base higher than that declared in the Deed.
The taxable base is the net value of the acquired Assets, understood as their market value fewer deductible charges and debts.
In the case of the Autonomous Community of Andalusia, it is established from 1 January 2022, by virtue of Law 11/2021, of 9 July, that the taxable base in the case of Assets will be the highest of: “The Reference Value provided for in the regulations governing the real estate cadastre on the date of accrual, the value of the Property declared by the interested parties or, by the price or consideration agreed. In the event that there is no Reference Value, the highest of the last two.”
3. Taxes payable by the Donee
The Donee must pay the following taxes upon receiving the real estate:
- Municipal Capital Gains Tax.
Since it is a Property, it will pay a Capital Gains Tax that will be calculated according to the real method or the objective calculation method.
- Inheritance and Gift Tax.
This Tax will vary depending on the Autonomous Community since, for example, in the case of Andalusia there is a 99% tax credit in the tax rate when it is an “inter vivos” acquisition between parents and children, provided that it is formalized in a public document as we have mentioned in the previous point.
4. Taxes payable by the Donor
The Donor will also have to pay taxes for transferring the property if they do so for a value higher than the acquisition price:
- Personal Income Tax (IRPF): Capital Gains.
If the transfer value of the property is higher than the acquisition value, there will be a Capital Gain, which would be taxed in your Income Tax Return in the savings tax base at a rate of 19% to 28%.
However, there is one scenario to consider in which this Capital Gain would be exempt: when the property that has been transferred for consideration or gratuitously is the Donor’s main residence and the donor is over 65 years of age.
We will continue in the next article where we will analyze this same Donation assumption in the case where the Donors did not have only one descendant. I would like to Donate a property to my son: II. What if I have other children?
