Tax Reduction in Madrid: Inheritances and Donations

Since 2019, the Community of Madrid has continued with tax reductions in all kinds of areas such as personal income tax (IRPF), rentals, and, once again, the Inheritance and Gift Tax (ISD). A total of 32 reductions, which places the Spanish capital as a leader in the Autonomous Fiscal Competitiveness Index in Spain (an independent index prepared by the Foundation for the Advancement of Liberty and the US Tax Foundation).

As part of the taxes ceded by the State, the Autonomous Community of Madrid has approved that, starting from July 1, 2025, when the law comes into force, gifts and inheritances between nephews/nieces and uncles/aunts (Group III) will see their ISD bonus increase from 25% to 50%. This regulation, in addition to increasing the tax bonus, also simplifies the requirements for accessing these benefits.

MAIN NOVELTIES

1. Extension of Bonuses.

The new regulation raises the bonus on the ISD tax liability to 50% for taxpayers in kinship group III, which includes:

• Second and third-degree collateral relatives by blood (brothers/sisters, uncles/aunts, and nephews/nieces)
• Second and third-degree collateral relatives by affinity (brothers-in-law/sisters-in-law, uncles/aunts by marriage, and nephews/nieces by marriage)
• Ascendants and descendants by affinity (parents-in-law, sons-in-law, and daughters-in-law)

Both mortis causa acquisitions (inheritances) and inter vivos acquisitions (gifts) receive this bonus, which was previously 25%. Although it is still far from the 99% bonus maintained by groups I and II (parents, children, and spouses).

2. 100% Bonuses for Small Gifts.

The tax liability on gifts of up to 1,000 euros, regardless of the degree of kinship, receives a total bonus on the tax liability. However, this bonus can only be applied once every 3 years between the same donor and donee.

Furthermore, the submission of self-assessment will not be mandatory when the donated asset does not require registration.

3. Formal Simplification.

From July 1, the requirements regarding public documents are made more flexible:

1. It will only be mandatory when the taxable base of the gift exceeds 10,000 euros (provided by the law does not require it for its validity).
2. Gifts made in a private document can be elevated to a public document within a voluntary self-assessment period without losing the tax benefit.

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SPAIN’S PLAN TO INCENTIVISE SAVINGS AND INVESTMENT

The CNMV (National Securities Market Commission) has highlighted the need to make European savings accounts more attractive both fiscally and operationally. They encourage offering tax advantages to incentivise long-term investment and direct savers’ money towards key sectors like digitalization and sustainability.

Spain, along with other European countries, is promoting a Competitiveness Laboratory to establish a label for investment products that provide tax benefits. However, since taxation is a national competence, the European Commission can only make suggestions or recommendations.

The CNMV also emphasizes the need to improve financial education so that citizens can access more profitable investment options beyond bank deposits. Additionally, measures are being prepared to strengthen capital markets and reduce burdens for fund managers.

In this regard, Inverco and the CNMV have joined forces to implement key European and OECD proposals for funds and pensions, welcoming additional tax incentives. This was discussed at the 2025 General Assembly of Inverco held in Madrid on June 04-06-2025, specially how to boost savings, investment in funds and pensions.

Nationwide, a key factor would be to maintain the current regulatory framework for funds while welcoming extra tax advantages to attract new investment flow. On the European side, the upcoming measures should eliminate national barriers to the cross-border commercialization of founds.

Moreover, the OECD made a report in which recommends to take action and promote measures such as boosting company and individual pension plans while considering contentious issues like removing the ten-year liquidity cutoff in pension vehicles. 

SOURCES:

1. Ángel Alonso, Madrid, 04-06-2025 “la CNMV insiste en que las cuentas de ahorro europeas sean ‘fiscalmente atractivas y sencillas operativamente’”
2. Funds Society, 04-06-2025 “Inverco y la CNMV suman fuerzas para materializar las propuestas marcadas por Europa y la OCDE en fondos y pensiones, y dan la bienvenida a incentivos fiscales añadidos.”

Against Squatting in Barcelona

The Provincial Court of Barcelona has changed its stance regarding squatting and now considers that "cutting off or refusing to pay utilities for squatters who forcefully occupy properties will not constitute a crime of coercion". The courts have also clarified that it must be "verified that the conditions that originally justified the measure still
apply," referring to Real Decreto-ley 11/2020 and Real Decreto-ley 1/2025, which extend the extraordinary suspension of evictions for 'vulnerable' individuals.

However, this change is limited to specific circumstances. First, these measures only apply in cases where the squatter has taken possession by force—they do not apply to tenants who fail to pay rent (which would still constitute coercion). Second, it must be proven that the squatters are not in a vulnerable situation or that their actions amount to
'true abuse.' Finally, this ruling only applies in Barcelona and Girona, as the rest of Spain has not yet adopted this legal shift.

The courts are debating the interpretation of the law and the reality faced by citizens. While it is true that some cases of squatting stem from necessity, it is equally true that legitimate property owners often feel abandoned. This is why the decision has been made to protect owners from those who exploit legal loopholes (fraus legis) to take
advantage of laws originally designed to protect genuinely vulnerable individuals. This could mark the beginning of the end for the government's anti-eviction policies. Time will tell whether this approach spreads to other Spanish courts.