Inheritance & gifts16 min read

Gifts and charitable donations: concepts, differences and taxation

Giving money or property to a relative can trigger Gift Tax, while a donation to a charity reduces your income tax. We explain the difference, the rules now in force in Madrid (including the €1,000 rule), the deadlines and the costliest mistakes.

Written by Coda Nuance Legal

Published on 1 January 2026

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In this article10 sections

Updated on 27 September 2026. Since 1 July 2025, in the Community of Madrid (Comunidad de Madrid) gifts of up to €1,000 carry a 100% tax credit and do not need to be declared, and a public document (in practice, a notarial deed) is only required to keep the tax credit above €10,000. We have reviewed the article in line with those rules and added deadlines, worked examples and the current tax relief for charitable donations.

Giving money or property to a relative seems, at first sight, a simple gesture with no consequences. For the tax authorities, however, many of these everyday situations are not simply presents but gifts subject to Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones, ISD). Many people only find out when they receive a notice from their autonomous community (comunidad autónoma), which is the body that manages this tax.

Gift and charitable donation: how they differ

In everyday language the two words are used interchangeably, but they are not taxed in the same way. Article 618 of the Civil Code (Código Civil) defines a gift (donación) as an act of liberality by which one person disposes of something free of charge in favour of another, who accepts it. It covers anything from a birthday present to handing over a flat.

A charitable donation (donativo) is not a separate category in the Civil Code. It is the name given, mainly in Law 49/2002 on patronage (mecenazgo), to a gift made to a non-profit entity or a public authority. What changes is the tax treatment:

Gift to an individual: the recipient pays ISD.
Donation to an entity covered by Law 49/2002: the entity pays no ISD, because legal persons are not subject to it, and the donor can deduct part of it in their income tax return.

As for form, money and other movable property can be given verbally, with immediate delivery, or in writing with written acceptance (art. 632 of the Civil Code). Real estate requires a notarial deed (escritura pública) (art. 633). The fact that a gift of money is valid without a notary does not mean it need not be declared, and in Madrid the type of document affects how much you pay.

Gifts the tax authorities monitor… and that hardly anyone declares

ISD taxes any gratuitous transaction between living persons (art. 3.1.b of Law 29/1987), not just the classic gift. The ISD Regulations expressly include forgiving a debt with donative intent, waiving rights in favour of a specific person and taking over another person's debt without consideration, releasing them from it (art. 12 of Royal Decree 1629/1991). Very common situations fall into this category:

giving a child money for the deposit on a home;
cash presents for a wedding, first communion or christening;
forgiving a family loan;
selling a property to a child for far less than it is worth: if the price is not genuine or is never paid, the authorities can treat the transaction, in whole or in part, as a disguised gift (arts. 13 and 16 of Law 58/2003, the General Tax Law, Ley General Tributaria).

The law also allows the authorities to presume a gift when one person's wealth falls and that of their spouse, descendants, heirs or legatees rises, or when parents buy in the name of minor children who have no means of their own; before issuing an assessment, they must let you submit arguments and evidence (art. 4 of Law 29/1987).

A useful nuance: adding a child as joint holder of a bank account is not in itself a gift, because joint holding gives a power to withdraw, not ownership of the balance (Directorate-General for Taxation, Dirección General de Tributos, binding ruling V0640-25 of 8 April 2025). It is a different matter if the child withdraws that money and keeps it.

Inheritance and Gift Tax: the essentials

ISD taxes inheritances, gifts and life insurance payouts where the beneficiary is not the person who took out the policy (art. 3.1 of Law 29/1987). With gifts, it is the recipient who pays, not the giver (art. 5).

If the recipient is a company or other legal person, there is no ISD: it is taxed under Corporation Tax (Impuesto sobre Sociedades) (art. 3.2). Entities covered by Law 49/2002 are exempt on the donations they receive for their purposes (art. 6 of that law).
The tax is devolved to the autonomous communities, which manage it and approve their own allowances and tax credits.
Which community is competent: for real estate, where the property is located; for money and other assets, where the recipient has lived for the most days in the previous five years (art. 32 of Law 22/2009). If the recipient lives outside Spain, the return is filed with the Agencia Tributaria (Spanish Tax Agency), but they are entitled to apply the rules of the community where the property is located or, for movable assets in Spain, those of the community where the assets were located for the most days in the previous five years (second additional provision of Law 29/1987).
Value: market value; for real estate, the Cadastre reference value (valor de referencia del Catastro), or the declared value if higher (art. 9).
Aggregation: gifts between the same people within three years are added together to set the rate (art. 30). Splitting a gift does not reduce the tax.

Deadlines and the consequences of not declaring

Gifts: 30 working days (Saturdays, Sundays and public holidays do not count) from the day after the gift (art. 67 of the Regulations). In Madrid you file modelo 651 (the Madrid gift tax return form).
Inheritances: six months from the death, extendable by another six if requested within the first five months (arts. 67 and 68).

If you file late without a prior request from the authorities, you pay a surcharge of 1% plus a further 1% for each full month of delay; after twelve months it is 15% plus late-payment interest, with no penalty (art. 27 of the General Tax Law). If the authorities find it first, the tax and interest come with a penalty of 50% to 150% of the unpaid amount (art. 191).

The general limitation period is four years from the end of the filing period (arts. 66 and 67 of the same law). If the gift is recorded only in a private document, the Regulations postpone the start of that period until the document's date takes effect against third parties, for example when it is submitted to a public office (art. 48.2 of the Regulations and art. 1227 of the Civil Code). That is why an undeclared gift can come to light years later.

Are there gifts that are not taxed?

We used to say there was only one case with no tax. Today, at least in Madrid, that needs qualifying.

1. What is covered by the legal duty of maintenance

Meeting the basic needs of a relative to whom you owe maintenance (alimentos) is not a gift but the fulfilment of a legal obligation. Article 142 of the Civil Code provides that:

Maintenance means everything that is essential for sustenance, housing, clothing and medical care.

Maintenance also includes the education and instruction of the person entitled to it while they are a minor, and even afterwards where they have not completed their education for reasons not attributable to them.

Maintenance shall include the expenses of pregnancy and childbirth, insofar as they are not otherwise covered.

This duty exists between spouses and between ascendants and descendants; between siblings it is limited to what is necessary to live (art. 143). The Directorate-General for Taxation takes the view that these amounts are not taxed because there is no intention to give, and that only a mere act of generosity would be taxable (binding ruling V0592-07 of 21 March 2007). This is an administrative criterion, not an exemption written into the law: paying tuition or rent for a child who is still studying usually fits; giving them €60,000 to buy a flat does not.

2. In Madrid, gifts of up to €1,000

Since 1 July 2025, gifts between individuals with a taxable base of up to €1,000 carry a 100% tax credit (bonificación), whatever the relationship (art. 25.2.a of Legislative Decree 1/2010, as amended by Law 2/2025). All gifts from the same donor to the same recipient in the previous three years are added together; once the limit is exceeded, the tax credit no longer applies. No return has to be filed, unless the asset given must be entered in a public register. Strictly speaking the gift is still subject to tax, but the tax comes to zero: this is the rule that covers most birthday, wedding and communion presents.

3. In Madrid, money for a main home or to start a business

Where money is given to descendants, a spouse, ascendants or siblings, Madrid allows a 100% allowance (reducción), up to €250,000 over three years, if the recipient uses it within one year for one of these purposes (art. 22 bis of Legislative Decree 1/2010):

buying their main home;
subscribing for shares when a public limited company, private limited company, employee-owned company or cooperative is set up or increases its capital;
their own sole-trader business or professional practice.

The company option does not work for just any company: it must meet the conditions in article 15 of the same decree. Among other things, the company must have its registered office and tax domicile in Madrid and carry on a genuine business activity, not merely manage assets, and, as a general rule, it must have staff: at least one full-time employee from its first financial year if it is newly formed or, for a capital increase, it must have been formed in the previous three years and raise its average headcount by at least one person. In addition, the recipient's stake, added to that of their spouse and relatives up to the third degree, must not exceed 40% and must be held for three years.

Common requirements:

the purpose must be stated in the gift document;
above €10,000, adding up the gifts made over three years, a public document is required, executed within the filing period;
the home must be lived in within 12 months and for at least three years in a row;
if the purpose is not met, a supplementary return must be filed within one month, with late-payment interest.

In this case you do have to file, even if nothing is payable.

How much tax is paid on a gift in Madrid?

The value given is subject to allowances, the regional rate scale (from 7.65% to 34%) and a coefficient based on the relationship and the recipient's existing wealth (arts. 23 and 24 of Legislative Decree 1/2010). Article 25.2.b then applies these tax credits:

99% for Groups I and II: descendants, spouse, ascendants, adoptive parents and adopted children. Registered couples (parejas de hecho) under Madrid Law 11/2001, or in an equivalent register, are treated as spouses (art. 26).
50% for Group III: second- and third-degree collateral relatives and ascendants and descendants by marriage (art. 20.2.a of Law 29/1987), such as siblings, uncles and aunts, nephews and nieces, parents-in-law, sons- and daughters-in-law or stepchildren. Until 30 June 2025 it was 25%, and only for blood siblings, uncles, aunts, nephews and nieces.

Requirements:

Declare within the deadline, or late but before any request from the authorities. Anything not declared gets no tax credit.
For gifts of money or bank balances, justify where the funds come from and state it in the gift document itself.
Use a public document if the taxable base exceeds €10,000, adding up everything given by the same person in three years. If you convert a private document into a public one after the filing period, you lose the tax credit.

Example with €50,000 in cash, with no special purpose, to a recipient resident in Madrid with existing wealth below €403,000:

Recipient	Tax before credit	Tax credit	Payable (approx.)
Child, spouse or parent (Groups I and II)	€4,944	99%	€49
Sibling or nephew/niece (Group III)	€7,852	50%	€3,926
Cousin or friend (Group IV)	€9,888	None	€9,888

If that money is transferred to a child without a public document or a return, the tax credit is lost and the tax goes from €49 to €4,944, plus surcharges or a penalty. Since 1 July 2026, Madrid has also applied a 99% allowance to gifts of family businesses and shareholdings (Law 3/2026 of 30 June on Support for Family Businesses); we explain it in how a family business is taxed. Outside Madrid these figures do not apply: each community has its own rate scale and tax credits.

Do not forget the donor's income tax or the municipal capital gains tax

Giving money creates no income for the donor.
Giving away property, shares or other assets that have risen in value creates a capital gain in the donor's income tax (IRPF), calculated using the ISD value capped at market value (arts. 33 to 36 of Law 35/2006). If they have fallen in value, the loss does not count (art. 33.5.c). On death, by contrast, there is no gain for the deceased (art. 33.3.b).
If urban property is given, the recipient may also have to pay the municipal capital gains tax (plusvalía municipal), because in gratuitous transfers it is paid by the acquirer (art. 106.1.a of the consolidated Local Finance Act, Ley Reguladora de las Haciendas Locales, approved by Royal Legislative Decree 2/2004).

Charitable donations: how they reduce your tax

Relief is available for irrevocable, unconditional donations to the entities listed in article 16 of Law 49/2002: non-profit entities under its tax regime (many foundations and public-interest associations, for example), the State, the autonomous communities, local councils and public universities, among others. You may receive something symbolic in return, provided it is worth no more than 15% of the donation and never more than €25,000 (art. 17).

For income tax (art. 19, in force since 1 January 2024) you can deduct:

80% of the first €250 donated in the year;
40% of the rest;
45% of the amount above €250 if you gave to the same entity in each of the two previous years and neither last year's donation nor this year's was lower than the year before.

The deduction base cannot exceed 10% of your taxable income (art. 69.1 of Law 35/2006). For example, a €400 donation lets you deduct €260. Other reliefs worth knowing:

10% for donations to foundations and public-interest associations not covered by Law 49/2002 (art. 68.3.b of Law 35/2006);
in Madrid, a 15% regional deduction for donations to foundations entered in its register and to grassroots sports clubs (clubes deportivos elementales y básicos) (art. 9 of Legislative Decree 1/2010);
for companies, 40% under Corporation Tax (50% for repeat donations to the same entity), capped at 15% of the taxable base (art. 20 of Law 49/2002).

You prove it with the certificate issued by the entity, which also reports it to the Tax Agency (art. 24). If you donate assets rather than money, the capital gain and the municipal capital gains tax are exempt (art. 23). Bear in mind, though, that a donation is not free: you hand over the money and recover part of it in your tax return. Nor is it a way to pass wealth to your family.

Common mistakes

Transferring money to a child with no document and no return, or documenting more than €10,000 privately without stating where the funds come from: in Madrid the tax credit is lost.
Forgetting that each donor counts separately. If both parents give a home, the child files two returns.
Looking only at Madrid's ISD and forgetting the donor's income tax, the municipal capital gains tax or that the rules differ in other communities.
Forgetting the inheritance. What is given to a child is added to the estate to calculate the forced shares (legítimas) and, unless the donor waives it, is taken into account in the division (arts. 818, 1035 and 1036 of the Civil Code); we explain it in lifetime gifts and forced shares. For ISD, gifts to the same heir in the four years before the death are added to the inheritance to set the rate (art. 30.2 of Law 29/1987).

Frequently asked questions

Do I have to declare the money I receive as wedding presents?

In Madrid, no, as long as what each person gives you does not exceed €1,000, including anything they gave you in the previous three years. If someone gives you more, that gift must be declared within 30 working days. If it is your father or mother, you will pay 1% of the tax provided you file on time, the document states where the money comes from and, if the gifts over three years exceed €10,000, the gift is made in a public document executed within that period. If the present is for both of you, each of you in principle receives half (art. 637 of the Civil Code); if it comes from your parents, your spouse's half is taxed as a gift to a son- or daughter-in-law (Group III), with a 50% tax credit.

Is a family loan better than a gift?

It is a different transaction, and it only works if it is a genuine loan: in writing, with repayment terms that are actually met. It is exempt from Transfer Tax (Impuesto sobre Transmisiones Patrimoniales), but the document must be filed (arts. 45.I.B.15 and 51 of the consolidated Transfer Tax and Stamp Duty Law, approved by Royal Legislative Decree 1/1993), and income tax law presumes that loans earn interest unless the contrary is proved (art. 6.5 of Law 35/2006). If you later forgive it, that write-off is a gift.

Check before you give

A poorly planned gift can end in a tax assessment with surcharges, interest and penalties, and some mistakes cannot be fixed, such as converting a document into a public one too late. If you are going to make or receive a gift, check beforehand which community is competent, what document you need and what it will cost in total. If you wish, you can book a consultation or write to us about your case.

Legislation and sources

Before you apply this to your own case

This article is general information and reflects the rules in force on the date of publication. It is not legal advice on a specific matter: one nuance — a date, a tax residence, a single clause — can change the answer entirely. If your situation looks like the one described here, talk to us before you decide.

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Written by

Coda Nuance Legal

The Madrid law firm of Irene Cobo Navarro, lawyer

Advice in Spanish and English on tax, immigration, inheritance, property, employment and social security, and contracts. Published prices, a detailed quote before we start and direct contact with a person.

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