Lifetime gifts: what the Spanish tax authority says

A lifetime gift —money to buy a home, a property to your children, or a sum to start a business— can be highly tax-efficient. It can also generate a high cost when made without proper planning. It is therefore advisable to consider together both Inheritance and Gift Tax and its effects on Personal Income Tax, and to know the position taken by the Directorate-General for Taxation.

The framework: Gift Tax and regional competence

A gift is subject to Inheritance and Gift Tax (ISD), a State tax whose administration and rules are largely devolved to the autonomous communities. As a result, the effective tax burden depends decisively on which autonomous community is competent and on the applicable rules.

The regional allowance: the main incentive and its requirements

Several autonomous communities grant allowances of considerable scope on gifts between parents and children —in some, of up to 99% of the tax payable. Their application, however, is conditional on meeting certain formal requirements: often, a gift of money must be made by public document, and the source and destination of the funds must be evidenced. Failure to use a public deed may result in the complete loss of the benefit.

The recent position of the Directorate-General for Taxation

The Directorate-General for Taxation issued several binding rulings of interest in 2025:

• Gift of money to a descendant resident abroad (ruling V1515-25 of 19 August 2025): the transaction is subject to tax in Spain under limited tax liability where the cash is located in Spanish territory at the time of the gift, raising the question of which regional rules apply for the purposes of the allowance.
• Gift of the main home to children (ruling V1261-25 of 9 July 2025): an often-overlooked effect must be assessed; for the donor, the gratuitous transfer generates a capital gain in Personal Income Tax for the difference between the acquisition and transfer values, even though no consideration is received.
• Adding a child as joint holder of a bank account does not, in itself, constitute a gift, unless the elements of a gratuitous transfer are present. An apparently trivial step may therefore have tax relevance.

Three common mistakes with a tax cost

1. Making a gift of money by private document to avoid notary costs, with the consequent loss of the regional allowance.
2. Overlooking the donor's Personal Income Tax when gifting property: the saving obtained on Gift Tax may be neutralised by the taxable capital gain.
3. Failing to determine the competent autonomous community, particularly where the donor or the recipient reside in different communities or abroad.

What it means for you

Before making any gift, it is advisable to quantify its overall cost —both Gift Tax and the donor's Personal Income Tax— and to assess whether a more suitable alternative exists. A properly planned gift is an effective instrument for transferring wealth; an improvised gift can prove costly and irreversible.

How we support you at RCM Legal

At RCM Legal we quantify the transaction before it is made —taxation under Gift Tax and in the donor's Personal Income Tax— and determine the most efficient and secure approach for each case: gift, private loan or, in the territories where the institution is recognised, a succession agreement. If you are planning a gift, set out the transaction and we will tell you how to structure it lawfully.