What taxes are applied on donations from parents to children?

In this case, it is the son who receives the goods, rights or donated amounts.

The Autonomous Community that corresponds according to the following criteria will have jurisdiction for the settlement:

• If it concerns movable goods or money, the one where the child had their habitual residence.
• If immovable property (houses, land or premises) is donated, the one where the property is located will have jurisdiction.

The general rule is thirty working days, counting from the day after the act or contract takes place. The deadline to settle the donation tax in Catalonia is one month counted from the day the act or contract takes place.

Both deadlines seem similar, but their difference is quite significant. In the thirty-day period, these are understood to be working days, excluding Saturdays, Sundays, and declared holidays from the count. On the other hand, in deadlines specified by months, they are counted from date to date. If in the month of expiry there is no day equivalent to the initial date of the count, the deadline is understood to expire on the last day of the month. When the last day of the deadline is a Saturday, Sunday, or holiday, it is extended to the next working day.

As we have mentioned, although it is a state tax, it is delegated to the Autonomous Communities, and they are the ones who set certain aspects such as reductions, applicable rates, discounts, coefficients, etc. For this reason, it can vary considerably from one Community to another, so we will focus on the donation tax in Catalonia, calculated according to the following rules:

1. Taxable base: In Catalonia, as in the other Autonomous Communities, it must start from the taxable base, that is, the value of the donated item. If a property or money worth €100,000 is donated, this amount will be the starting point.
2. Net taxable base: In donations, the net taxable base corresponds to the taxable base, except when any of the reductions that we will see below apply.
3. Gross amount: It is obtained by applying the reduced tax rate to the net taxable base, which corresponds to groups I and II and when the donation is made before a Notary, the said rate being as follows:

• The donee must be a child or descendant of the donor and not be older than 36 years, with a taxable base in the IRPF of less than 36,000 euros.
• The reduction will be 95% of the donated amount up to a maximum of €60,000, which can reach €120,000 for children who have a degree of disability equal to or greater than 65%.
• In the case of money donations, the child must acquire the property within three months from the date of the donation.
• In the case of land, it is necessary that the first habitual residence of the child is built on it, and that this construction is carried out within three years following the date of the donation.

• The donee must be a child or descendant of the donor, be no older than 40 years, and their assets cannot exceed €300,000.
• The reduction will be 95% of the donated amount, up to a maximum of €200,000, which may reach €400,000 in the case of disabled persons with a degree equal to or greater than 33%.
• The company, business or entity must have its registered and tax address in Catalonia and the net turnover of the last financial year must not exceed €3,000,000 if it is a company or €1,000,000 if it is a professional business.
• The child must continue to perform management functions in the entity for the five years following the donation.

• The donee must be a child, descendant or also the spouse of the donor.
• The reduction will be 95% of the value of cultural assets of national interest and of the catalogued movable goods.
• That they are kept in the child's estate for at least 5 years.

• It is not mandatory for the donee to be a child or descendant of the contributor, but they must meet the disability requirements established by the Law. You can learn more here about the notary service for the constitution and contributions of protected assets.
• It implies a 90% reduction of the donated amount.

The father, who is the one making the donation. He must do so in the income tax return corresponding to the year in which the donation was made.

The father must pay tax on the capital "gain" he has had, that is to say on the increase in value between the acquisition price and the transfer price. How can this be if it has been transferred free of charge and there is no gain? Well, although it may seem incredible, it is so, because the donated asset has a value at the time of making the donation, and if this is higher than the acquisition value, tax must be paid.

Capital gain is calculated by the difference between the acquisition value and the transfer value (donation).

The acquisition cost paid will be, according to the Tax Agency itself:

• In the case of properties acquired for consideration: the purchase price including expenses and taxes inherent to the acquisition (notary, registry, non-deductible VAT, Transfer Tax and Stamp Duty, agency fees, etc.) as well as the cost of investments and certain improvements made.
• In the case of properties acquired gratuitously (inheritance or donation): the value of the asset determined according to the rules of the Inheritance and Donations Tax without exceeding the market value, together with the expenses and taxes paid for its acquisition as well as the cost of investments and improvements made.

It will be the value stated in the deed, which cannot be lower than the reference value set by the Treasury, unless a lower value is justified through an appraisal. This value may be reduced by deducting the necessary expenses paid by the donating father.

However, this applies to the donation of assets, mainly real estate, since if money is donated there is no such increase in wealth, because the nominal value of the money does not change.

The municipal capital gains tax is the common name for the Tax on the Increase in Value of Urban Land. This is a municipal tax that levies the increase in value of urban land.

This tax must be paid when the donated asset is an urban property, such as a house, land, a garage, or a commercial premises, for example.

If what is donated is rural land, this tax will not have to be paid, nor will it be paid if the assets are movable property or money.

The municipal capital gains tax is paid, as it is a lucrative transfer, by the person receiving the asset, that is to say, in this case, the son, according to article 106.1a of the revised text of the Law Regulating Local Authorities.

The deadline to submit the settlement is 30 working days from the granting of the lifetime donation from parents to children, with no possibility of extension.

Regarding the calculation of the capital gains tax, at JLA Notarios, we wrote a specific post on our blog discussing the topic, including the latest updates. We leave you the link here in case you are interested.

The new municipal capital gains tax. A brief guide to the new Royal Decree and the main updates

The capital gains tax must be paid at the town hall of the locality where the person managing the procedure is located.