Gifting Your Spanish Home to Your Children: The Tax That Lands on You

The short answer

In the Valencian Region, a child who receives a house from a parent pays almost no gift tax: there is a 99% relief. The bill usually lands on the parent instead: capital gains tax, as if you had sold the house at today's value. And it is a bill you would never pay if your child inherited the house.

The case

Recently my father, Juan Bertomeu, a lawyer since 1991, signed one of these gifts at the notary: parents giving their house to their son. I talk about it in our video diary, from minute 11:09. It is one of the questions we hear most from parents in their sixties and seventies, and the answer surprises almost everyone, because the tax that matters is not the one they ask about.

Your child pays almost nothing

• Gifts from parents to children get a 99% relief on gift tax in the Valencian Region. So do gifts between spouses, and from grandparents to grandchildren. Your child pays 1% of the tax that would otherwise be due.
• It applies even if your child lives abroad, because for a house, the rules of the region where it stands apply.
• The value taxed is the Catastro's reference value, or the value you declare if it is higher.
• Two conditions: the gift is signed before a notary, and your child declares it. The deadline is 30 working days, on Modelo 651 if they do not live in Spain.

You pay as if you had sold

Spanish tax law treats the gift of a house as a sale at today's value. The difference between that value and what you paid, plus your purchase costs, is your gain. And the gain is yours, not your child's.

An example with round numbers. You bought in 2006 for 200,000 euros and paid 20,000 in taxes and notary fees. Today the Catastro's reference value is 400,000. Your gain is 180,000 euros.

• If you do not live in Spain, you pay 19% on it: 34,200 euros. If the house is in both your names, each of you declares half. Nothing is withheld at the notary, because nobody pays a price, but you still have to declare the gain on a non-resident tax return.
• If you live in Spain, the gain goes into your Spanish income tax return, at between 19% and 30% depending on its size. And if you are over 65 and the house is your main home, the gain can be exempt. That is the one case where a gift costs the parent nothing.

The town hall's plusvalía: your child pays it

On top of that, the town hall charges its plusvalía on the land. In a gift it is paid by the person who receives the house, within 30 working days of the deed. If the land has not gained value it can be zero, but you have to prove it with the deeds.

Gift it now or leave it in your will?

Here is the part worth sending to your family: if your child inherits the house, your capital gain is never taxed. Spanish law does not tax the gain of someone who passes away. And in the Valencian Region children also get the 99% relief on inheritance tax, if most of what you own in Spain is here. So a gift does not save tax. It brings the bill forward and puts it on you.

A gift still makes sense when:

• there is little or no gain, because you bought recently or at today's prices;
• you live in Spain, you are over 65 and it is your main home;
• you want your child to have it now, and the numbers are clear.

One upside for your child: if they sell later, their gain is measured from the value at the gift, not from your old purchase price.

If the will is the better route, do it properly: do I need a Spanish will?

What we check before the deed

1. Your gain: the purchase deed and everything you paid on top.
2. Where each of you is tax resident.
3. The Catastro's reference value today.
4. Whether the town hall's plusvalía is zero.
5. Gift now or a Spanish will: the numbers side by side.

Send us your purchase deed and your last IBI receipt, and we will tell you in writing what each of you would pay before anyone signs. The full picture is in our guide to inheriting a Spanish property.