Lens on Spain - 10 July

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.

DISCLAIMER: This document has been prepared for internal professional development purposes only. It is also exceptionally addressed, as a courtesy, to a circle of selected contacts for information purposes. Reproduction and distribution to third parties is prohibited. It cannot under any circumstances be considered as legal, fiscal, accounting or any other kind of professional opinion. Grimaldi Alliance is at disposal for any further information and/or request and/or clarification.

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