- By Paul SITGES
How to pay less taxes for a donation to children or grandchildren for the purchase of a property in Catalonia
If as a parent or grandparent, you plan to donate money to your child or grandchild so that they can buy their first residence, or you have a house that you want to "give" them, you should know that, if a series of requirements are met that are necessary to be able to opt for the important existing bonus, and by carrying out the operation in a timely manner, they can save a lot of money on the Donation Tax, which is the Tax that is levied on the operations in which money or goods are transmitted for free to someone, without any compensation.
The Seventh Section of Law 19/2010, of June 7, regulating the tax on inheritance and donations, establishes a very important reduction of the 95% of the amount of the donation or of the value of the donated property.
In order to apply this bonus when self-assessing the corresponding tax, whether by monetary donation, housing donation or a combination of both, whether they come from the same ascendant or from different ascendants, the person must be in compliance with the requirements and formalities established by the Regulatory Law of the inheritance Tax that we will detail below.
Requirements to opt for the bonus
Now, who is entitled to enjoy this reduction? Article 55 of the mentioned norm establishes the following requirements that must be met in order to do so:
1) Be a daughter or descendant of the donor.
2) The donation will have to be formalized before a Public Notary, expressly stating that the donated money or property, it is in concept for the property to be acquired or acquired will be established as the habitual residence of the child or grandchild. The public deed of formalization of the donation must be made within a period of one month from the delivery of the money (and if there had been several transfers, the period of one month would count from the first amount that was delivered)
3) The donee (beneficiary), that is, the child/descendant, must be under 36 years of age (except in cases where the donee has a degree of disability equal to or greater than 65%).
4) The total tax base of the child or grandchild of the last income statement, subtracting the personal and family minimums, must be less than €36.000.
5) In the case of donation of money, the acquisition of the property by the descendant must be made within three months from the date of the donation. In the event that several donations were made for the same purpose at different times, the term would start from the date of the first donation.
6) A habitual residence is considered to be one that meets the requirements of the definition of housing for the personal income tax, as well as two parking spaces and a storage room, provided that the latter are established within the same building or the same urban complex. Likewise, the acquired property will have to be the usual residence for a continuous period of at least three years.
Quantities to which the reduction applies
Likewise, it must be taken into account that the maximum amount to which this reduction will be applied is €60.000, or €120.000 in the case of donees/beneficiaries with a disability of 65% or more.
It can be made in a single donation or in successive donations.
Up to €60.000 or €120.000 (depending on the case) the reduction may be applied; however, the remaining amounts that exceed these quantities, that is, those that exceed the amounts with the right to be reduced, will be taxed without applying any type of bonus (that is, paying between 5% and 9% depending on the total amount).
Two different examples of the latter scenarios:
1) EXAMPLE 1.- Three donations are made by mother A to her son B. The first donation is €2.200, the second is €18.800 and the third is €39.000. Therefore, the total amount of these successive donations is €60.000.
Given that the amount of the donations will be used to purchase the child's first habitual residence, the 95% reduction will be applied to the maximum amount of €60.000.
The 95% of €60.000 is €57.000, therefore, the remaining €3.000 will be the tax base.
The tax rate of 5% corresponding to the tax that is applied to this taxable base of €3.000, thus resulting in a full amount to be paid of €150. In short, the descendant will only have to pay €150 for the tax.
2) EXAMPLE 2.- Father C donates an amount of €70.000 to his daughter D for the sale of her first habitual residence.
Up to the amount of €60.000, the tax will be settled in the same way as in the previous case and the payable fee will be €150. On the other hand, the remaining €10.000 that exceed this amount will be taxed at 5%, that is, the payable amount of these €10,000 will result in a payable fee of €500.
Thus, the total self-assessment of the tax will add up to a total of €650, which is the amount that the daughter or descendant would have to pay.
Deadline for the presentation and payment of the self-assessment of the tax
The term to carry out the self-assessment, payment and file the corresponding documentation is one month from the date of the act in the public deed. In the event that the term ends on a Saturday or Sunday, it will be extended until the first following business day.
In addition, those who buy a property and are under 32 years of age will have to take into account the bonus at the time of self-assessment of the Property Transfer Tax when buying a house, and the tax rate of the 5% of the value of the property, instead of applying 10% as in the rest of the cases, provided that in the last declaration of income as of natural persons it does not exceed €30.000.
If you need advice or want us to manage the donation and pay the corresponding taxes, request a face-to-face visit at our offices with our lawyers specialized in this matter or, if you prefer, formulate your legal query online and you will receive an answer by email.