Madrid has its own gift tax regulations as a result of the Spanish State ceding the tax revenue of inheritance and gift tax to Comunidades Autónomas, along with some regulatory autonomy to adapt tax to the particular circumstances of the respective Comunidad Autónoma.
This means that most Comunidades Autónomas have ruled new (and huge) benefits compared to those established by the Spanish State.
While the tax scheme and regime is the same in all parts of Spain, the Comunidades Autónomas took advantage of the given power to fix higher thresholds, or different rates or direct reductions on the amount to be paid (and sometimes all of these) to benefit close relatives or disabled people. There are also benefits that help promote local business, farming, etc. as well as in the acquisition of the Comunidad Autónomas’ cultural assets.
However, the Comunidades Autónomas change their regulations quite frequently so it is necessary to check the regulation in force at the time the tax is due.
Reductions for cash gifts
In Madrid, there are currently huge benefits for gifts in cash made to partners, ascendants or descendants, or siblings of the donor.
The benefit amounts to 100% of the value of the gift up to a limit of 250.000 €.
This limit applies to any single gift or to the sum of all the gifts made by the same donor, to the same donee, within a period of three years.
To benefit from this allowance the money must be designated, within a period of one year after the gift, for use in one of the following three ways :
The gift must be documented in a public deed before a notary, stating the destination of the gifted money.
If the gifted money is not used for the stated purpose, a new tax declaration will have to be made, so losing the benefits stated above and having to pay interest on the amount of tax that was not paid at the time.
Very importantly, the house acquired to be the main residence must be occupied within a year of the date of purchase or built within a year and occupied on an uninterrupted basis during a period of three years thereafter.
Deductions after the rate is applied
Ascendants, descendants, spouses and unmarried registered partners can apply a deduction of 99% on the tax payable on gifts. The gift must be formalized in a public deed.
Siblings of the donor can apply a deduction of 25% as can uncles, aunts, nephews and nieces. From 1st July 2025 this reduction increases to 50%.
For cash gifts or bank deposits the origins of the funds must be certified in the public deed which formalizes the making of the gift.
The above reductions and deductions are only applicable if the gift is declared by the tax payer in a gift deed presented voluntarily and without being required to do so by the tax authority, unless it is under 10,000€ as from 1st July 2025 in which case a public deed is not necessary.
It is not necessary to declare gifts under 1,000€.
For these limits above, all gifts made between the same donor and recipient within a period of three years are added together.
NB Unmarried registered partners are equivalent to spouses, adopted relatives to blood relatives.
Contact us for specific personal advice for your individual case