Complete Guide to Gift Tax in Spain (Model 651)

The Inheritance and Gift Tax (IGT) is a tax levied on increases in wealth obtained by individuals free of charge (i.e., without consideration). The "Gifts" modality applies to gratuitous acquisitions made "inter vivos" (between living persons), such as a gift of money from parents to children or the gift of a property.

This tax is state-level, but its revenue is ceded to the Autonomous Communities (ACs), which have broad regulatory powers to govern key aspects such as reductions, allowances, and rates. This causes large differences in the tax burden of a gift depending on the AC involved.

The declaration of this tax is made by filing Model 651.

The person obliged to pay Gift Tax is the donee, i.e., the person who receives the gifted assets or rights.

The competent Autonomous Community for the tax settlement (and therefore, the regional regulations to apply) depends on the type of asset gifted and the donee's tax residence:

• Gift of Real Estate: Tax is paid in the AC where the property is located, regardless of where the donor and donee reside.
• Gift of Other Assets (money, shares, vehicles, etc.): Tax is paid in the AC where the donee has their habitual residence on the date of the gift.

If the donee is a non-resident in Spain, special rules apply. Generally, they will be taxed according to state regulations, unless double taxation treaties or specific regulations exist (e.g., for EU/EEA residents receiving real estate in Spain, who may be entitled to apply the regulations of the AC where the property is located).

Deadline to Settle Gifts with Model 651

The deadline for filing Model 651 and paying the tax is 30 working days (excluding Saturdays, Sundays, and holidays) counted from the day after the gift is formalized (usually, the date of the public deed or private document evidencing the transfer).

Failure to meet this deadline for settling the gift entails the application of surcharges and late payment interest.

Main Necessary Documentation

• Duly completed Model 651.
• Document evidencing the gift:
  • Notarial public deed: Mandatory for gifts of real estate and highly recommended for other gifts of significant value (such as a substantial gift of money) for greater legal certainty and reliable proof of date and conditions.
  • Private document (for movable property, although less secure and may present problems in proving the date for tax purposes).
• Tax identification (NIF/NIE) of the donor (who gives) and the donee (who receives).
• Proof of the real value of the gifted assets (e.g., property valuation, bank statements proving money transfer, etc.).
• Documentation proving the right to possible reductions or allowances (e.g., donee's disability certificate, kinship documentation, proof of gift's destination if applicable, etc.).

The calculation of Gift Tax follows these general steps (simplified, as the specific regulations of each AC are decisive):

1. Taxable Base: This is the real value of the gifted assets and rights, less any deductible charges and debts that the donee might assume (if any and fiscally deductible).
2. Net Taxable Base: Obtained by applying to the Taxable Base the reductions approved by state regulations and, fundamentally, by the competent AC (for kinship, disability, type of asset gifted, donee's age, gift's destination such as purchase of a primary residence, etc.).
3. Gross Tax Liability: Calculated by applying the tax tariff (a progressive scale, with rates increasing with the amount, defined by the State or AC) to the Net Taxable Base.
4. Tax Due: Obtained by multiplying the Gross Tax Liability by a multiplying coefficient. This coefficient depends on the donee's pre-existing wealth and their kinship group with the donor (according to state regulations, although ACs can modify it).
5. Total Amount Payable (Tax Debt): This is the Tax Due less any possible allowances on the tax liability established by the AC. These allowances are very important and can drastically reduce the tax payable, reaching 99% or even 100% in some cases and ACs, especially for gifts between parents and children.

As mentioned, ACs have great capacity to modify Gift Tax, especially through reductions in the taxable base and allowances on the final tax liability. This means the amount payable for the same gift can vary enormously between territories, making it essential for estate planning.

Some of the most common reductions and allowances (always verify the specific regulations of the competent AC at the time of the gift!) are: