Donating money to your child: what the law says
Donating money to your child is legal and common. What many people do not realise is that the tax bill depends on where the recipient lives, not the donor. Gift tax in Spain is devolved to the autonomous communities, and each one sets its own allowances.
The national framework comes from Law 29/1987 of 18 December, the Inheritance and Gift Tax Act (ISD). But in practice, the regional rules determine how much you pay.
Kinship groups and national reductions
The national law classifies recipients into four groups:
- Group I: descendants under 21. Reduction of €15,956.87 plus €3,990.72 for each year under 21 (maximum €47,858.59).
- Group II: descendants aged 21 or over, spouse and ascendants. Reduction of €15,956.87.
- Group III: second and third-degree collaterals, ascendants and descendants by affinity. Reduction of €7,993.46.
- Group IV: fourth-degree collaterals and beyond, and unrelated persons. No reduction.
An adult child falls into Group II. The national reduction of €15,956.87 is applied before calculating the tax. But the communities can improve these figures, and most do.
Allowances by autonomous community
This is where differences are enormous. A €100,000 gift from parent to child can cost €0 in Madrid and over €7,000 in Catalonia.
Madrid. 99% discount on the tax for gifts between parents and children (Groups I and II). A €100,000 gift generates a theoretical tax of about €7,800. With the 99% discount, you pay €78.
Andalusia. Since 2019, gifts between parents and children are exempt up to €1,000,000 per recipient. If your child receives €200,000, the tax is €0. Above one million, the general rate applies.
Catalonia. There is no general discount for cash gifts between parents and children. A reduced rate of 5% to 9% applies depending on the base. For €100,000, the tax is around €5,000-7,000. There is a €60,000 reduction if the child is under 33 and the gift is used to buy a main residence.
Valencia. 99% discount for Groups I and II since 2023. Similar result to Madrid.
Aragon. 65% discount for gifts to children. A €100,000 gift costs around €2,700.
Castile and Leon. 99% reduction on gifts to descendants.
Galicia. Reduced rate of 5% to 7% for Group II. For €100,000, about €5,000.
Basque Country and Navarre. Own regional tax regime. In Biscay and Gipuzkoa, a flat 1.5% rate for gifts to children. In Navarre, 0.8%. A €100,000 gift costs €1,500 in Biscay or €800 in Navarre.
Requirements for donating money to your child
A cash gift does not require a public deed by law, unless it includes property. But a public deed is highly advisable for three reasons:
- Tax evidence. The tax authority may treat an undocumented bank transfer as a loan or undeclared income. The deed records that it is a gift and its date.
- Access to allowances. Several communities require a public deed to apply the discount. Madrid, for example, requires one for the 99% discount on cash gifts.
- Legal certainty. In the event of a later family dispute (inheritance, child's divorce), the deed proves the origin of the funds.
For property donations, a public deed is mandatory under article 633 of the Civil Code. Without a deed, a property donation is void.
How much to pay and when
The deadline for paying gift tax is 30 business days from the date of the deed. It is filed with the autonomous community where the recipient lives. Late surcharges apply:
- Up to 3 months: 5%.
- 3 to 6 months: 10%.
- 6 to 12 months: 15%.
- Over 12 months: 20% plus late-payment interest.
The self-assessment form is model 651 in most communities. Some have their own online platform.
Do you need to declare the gift on income tax?
The recipient does not pay income tax on the gift. Gift tax already covers that acquisition.
The donor may face income tax if donating assets with a capital gain. If you donate a property you bought for €80,000 now worth €200,000, the €120,000 gain is taxed on your income tax as if you had sold it. For pure cash gifts, the donor has no capital gain.
Limits and strategies
There is no legal limit on the amount you can donate. But there are practical considerations:
Collation in inheritance. Gifts to children are counted against their reserved share, unless the will says otherwise (collation waiver). If you donate €200,000 to one child and have three, the other two may claim in the estate.
Successive gifts. Some communities accumulate gifts from the same donor to the same recipient over a 3-year period. If you give €50,000 each year for three years, the base may be €150,000 rather than €50,000.
Gift vs. family loan. A loan between family members does not attract gift tax, but must be documented (private contract, actual repayments) so that the tax authority does not reclassify it as a gift. The loan is filed with model 600 at 0%.
How to process the gift online
At Notaría Online we process cash gifts by video conference. The process takes 3-5 business days:
- Send us the documents (donor and recipient ID, bank proof of the source of funds).
- We prepare the gift deed.
- Signing by video conference with the notary.
- We deliver the authorised electronic copy on the same day.
- With that copy, the recipient files model 651 in their community.
Check our prices for gifts. The notary fee depends on the amount donated.