In this article we are going to explain how we help one of our clients to accept a monetary donation from her parents, being our non-resident client for tax purposes in Spain.
The factual assumption was as follows: A Spanish citizen tax resident in Germany was preparing to accept a monetary donation from his Spanish parents tax resident in Spain. The amount donated came, in part, from the sale of a property owned by the couple located in the Community of Madrid. After the sale of the property, the couple decided to leave the capital and move to a town in Valencia, establishing this as their new habitual residence.
We are going to learn what are the formal requirements to be able to shape and materialize the donation, what will be the applicable law regarding the accrual of the donation tax and how we must declare it.
Can a donation be made to a person whose habitual residence is outside of Spain?
The answer is yes. The tax law does not differentiate between resident or non-resident people in Spain, therefore it is possible to donate money to somebody whether he resides in Spain or abroad.
How much money can I donate?
As much as you want. For the purpose of calculating the tax, depending on the Autonomous Community, points such as the total assets of the recipient must be taken into account, but the amount to donate can be freely chosen by the donor(s).
Do I have to go to the notary?
Yes. All donations, even monetary ones, must be registered in a public deed, this being an essential requirement if we want to take advantage of the reductions and/or allowances established by the tax law and regional laws.
The collational nature or not of the donation itself must be declared in the deed of donation, as well as the non-prejudice of legitimate rights and the non-intention of fraud by creditors.
It will also be necessary to specify, in the case of monetary donations, where the amount donated comes from.
Is it necessary for the destination bank account to be in Spain?
No. The destination account can be opened both in a Spanish bank and in a foreign one.
When do you have to make the transfer?
Once the signing date has been set at the notary, you can agree with the notary the date on which the money will be transferred from the source account to the destination account. It may be carried out one or two days before the signing or after, but in any case, a proof of transfer must be shared with the notary to be attached to the donation deed itself.
Important tax nuance unlike if the donee is a tax resident in Spain
When the donee is a tax resident in Spain, there is no doubt that the law applicable to the case will be the law of the autonomous community where the donee has his habitual residence. Thus, if the recipient lives in Madrid and her parents in Andalusia, the applicable regulations regarding reductions and allowances will be those of the Community of Madrid.
In the event that the donee is a non-resident, what will be the applicable law? According to the criteria followed by the Directorate General of Taxes, confirmed by the Court of Justice of the European Union and by the Supreme Court in order not to discriminate against non-resident donees with respect to residents, in cases where the donee If you are not a resident of Spain, the applicable regional law will be that of the autonomous community where the money has been for the longest period in the 5 years immediately prior to the donation. In this way, on the greatest number of occasions the applicable law will be the one in which the donor has his habitual residence, but not always, since as we have mentioned before in our example, the donors’ habitual residence would be fixed in Valencia after the donation, but the applicable law, in this specific case, would be that of the Autonomous Community of Madrid, since the original bank account was open at a branch in the city of Madrid. It is an important nuance to take into account when practicing the self-assessment of the tax.
Let us also remember that in order to benefit from regional tax benefits, the origin of the amount donated must be indicated in the donation deed itself. Thus, in our example, reference had to be made in the donation deed that the money donated came from the sale of a family property.
In order to prepare the self-assessment(s) we must take into account that if there is more than one donor, as many self-assessments must be prepared as there are donors. In our example, since the parents who donated money to their son were a married couple, we had to prepare two self-assessments, the tax base of each constituting half of the total amount of the donation.
Finally, highlight another point to take into account when preparing the donation: The destination bank account where the funds will be received must be owned solely by the recipient party, it cannot be a shared account since it could be understood that The amount is also being donated to the co-owners of the account itself.
For more information about donations, contact us without obligation through the following link: Contact us – Spanish Companies Incorporation