Donation Of Spanish Property

I am a British resident and I own Spanish property. Should I gift it to my children during my lifetime?

If you gift Spanish property to your children, there are various things that one needs to think about.

As a Spanish non tax resident, regardless of whether you sell or gift your property, you will need to account for 19% Spanish Capital Gains tax (CGT). A capital gain is calculated by taking the sale price and deducting the purchase price and related fees and costs. In addition to the 19% CGT, one needs to pay plusvalía. Plusvalía is essentially a municipal CGT.

If you gift your property during your lifetime, you will also need to account for lifetime inheritance tax (IHT) in Spain, often referred to as a ‘donación’ in Spanish. This is generally very low in Andalusia as there is a 99% exemption when gifting to children.

This is only part of the picture for British residents in that British residents need to also consider their potential obligations and tax liabilities in the UK.

UK CGT is ordinarily charged at either 18% or 28% on second residential property, depending on whether the person is a basic or a higher rate income tax payer. An individual will normally be given credit for the Capital Gains tax paid in Spain to avoid double taxation.

No lifetime inheritance tax in the UK would be payable and this is known as a PET - a Potentially Exempt Transfer. Provided that you live for seven years after the gift, it would not fall into your estate for the purposes of calculating UK IHT.

With property values continuing to rise, there is an increasing number of people who need to think about IHT. UK IHT at death, above applicable exemptions, is charged at 40% and 36%.

Each individual’s circumstances are different. For a confidential consultation tailored to your situation please contact Sam Baker, English solicitor at De Cotta Law: sambaker@decottalaw.net

Telephone 952 527 014.

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