Inherit or donate a home? We explain the difference in inheritance or donation tax

With the arrival of the pandemic caused by COVID-19, inheritances marked historical figures in Spain. So much so that, according to INE data, during the 2021 financial year a total of 198,939 residential properties were transferred through this procedure. So what to do:inheritance tax or donations?

Inheritance or donation tax

Similarly, donations show an upward trend, since they have rebounded by nearly 25% year-on-year, reaching a total of 25,062 operations in 2021, the highest figure recorded to date.

Still don’t know what the pros and cons of inheriting or donating a home are? We tell you everything you need to know about these processes. Is it fiscally more convenient to leave your children a home in inheritance or donate it in life? Clarify all your doubts about these complex processes.

Donate or inherit, a complex decision

To answer this big question we must know, more or less, what are the differences between both options in order to make the best decision. One of the main differences lies in time: while after signing the donation the transfer of the property can take place at any time, the inheritance requires, as a requirement for the transfer of the property, that the person who makes the will dies.

Both operations require the payment of their corresponding taxes, regulated by the Inheritance and Gift Tax Law, but Since this tax is ceded to the autonomous communities that regulate exemptions and bonuses, in some regions it can be much more expensive to inherit or receive a donation than in others, so in order to decide which option to choose, it will be necessary to attend to the regulation of each autonomous community.

Likewise, some factors will be decisive, such as the value of the inheritance, degree of kinship or age of the heirs, among others. In short, the cost of the inheritance will be different depending on the city in which you reside or the characteristics of the heir and the taxation for the donation received (by the donee) will also depend on the community in which you reside.

IRPF? Here he is quid of the matter!

The real tax difference when we find ourselves in the position of deciding between inheritances and donations goes through the tax disadvantages of the second option. Although donations continue to gain popularity, These operations must be declared as capital gains in the donor’s personal income tax.

Regulation of Inheritance and Gift Tax

This tax is regulated by the state regulations and is required throughout the Spanish territory.

According to the Law 29/1987, of December 18, on Inheritance and Gift TaxInheritance and Gift Tax taxes capital gains obtained free of charge (inheritance, donation, legacy…) by natural persons.

to be one legal person The one that receives the capital increase is taxed by Corporation Tax and not by Inheritance Tax.

The management of the Inheritance and Donations Tax is ceded to the Autonomous Communities and its regulation varies from one to another.

Almost all the Autonomous Communities establish reductions or bonuses, and the tax may vary considerably from one to another.

Cases in which you have to present the Inheritance and Donations Tax

There are 3 cases in which this tax must be filed:

1. If you receive goods and rights by inheritance, legacy or other title of succession (acquisitions for the cause of death).
2. If you buy goods by living donation (“intervivo” acquisitions).
3. If you are the beneficiary of a life insurance.

When are you required to pay Inheritance and Gift Tax?

They are obliged to pay the Tax as taxpayers:

1. In the successions: successors in title (heirs, legatees…).
2. In the donations: the donee (person who receives the donated property).
3. In the life insurances: the beneficiary.

In what term do you have to present the tax?

It will be different depending on whether it is a succession or a donation.

1. In case of inheritancesthe deadline for submission will be 6 months from the date of death.
2. In the donationsthe deadline for submission will be 30 business days counting from the day the donation is made.

Can you request an extension of these deadlines?

1. Only in case of inheritanceyou can request an extension of another 6 months to file the Inheritance Tax.
2. The extension must be requested within the first 5 months of the filing period.

Where do you have to file the Inheritance and Gift Tax?

Inheritance Tax

You must present the tax in the Autonomous Community where the deceased had his last habitual residence.

If the deceased has not had a habitual residence in Spain, the place of presentation will be: The Tax Office of Madrid. If any or all of the heirs have habitual residence in Spain, in the Autonomous Community where one of them resides.

Donation Tax

The place of presentation of this tax will vary according to the donated good.

Donation of real estate. The place of presentation of the Tax will be:

The Autonomous Community where the real estate is located.

• If the properties are located in different Autonomous Communities, where the highest value assets are located.
• If the donated properties have the same value, in the Autonomous Community where one of them is located.
• If the donated property is abroad, you must present the tax at the Madrid Tax Office.

Donation of personal property.

For example, if you have received donation money:

In the Autonomous Community where do you reside.

• If there are several donees with different residences, the tax will be presented in the Community where the donee of assets of greater value resides.
• If all the assets have the same value, in the Community of residence of one of the donees.
• If neither resides in Spain, at the Madrid Tax Office.

donation of real estate and personal property.

• If you have been donated a home and money, you must present the tax:
• In the Community where the home is located if it has a higher value than money.
• In the Community of your usual residence, if the value of money is greater than the value of the home.

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