For members


Inheritance tax in Spain: Should you pass your property on to your children or sell it to them?

For older residents in Spain who don’t want the burden of owning a property anymore, deciding what to do with it can be a difficult decision to make. Here, we look at your options.

old couple with house
Image: Huskyherz/Pixabay

Your decision on whether to pass your home on to your children or sell it should depend on several factors, including the price of your home, the taxes you have to pay on it, and which region of Spain you live in.

Passing your home on to your children

If you decide to pass your home on to your children, you must still settle the corresponding capital gains on your income tax declaration (IRPF), similar to if you sold it.

This is because simply gifting your home to your children is still taxable, however, it will be you that will have the responsibility to pay the capital gains tax and not your children.

If you have made a profit from the difference between the acquisition value of the property and the value of the property at the time of passing it on to your children, you will be taxed at your personal income tax rate between 19 and 23 percent, depending on how much profit you earned.  

However, if no profit was gained and the current value of the property is less than the acquisition value, then this loss will not be included in your personal income tax.

You will also be responsible for paying the corresponding municipal tax. How much you owe for this will depend on the town hall in the area where you live.

Your children may not have to pay the capital gains tax on the property, but they will still be liable to pay inheritance tax or gift tax. How much they pay will depend on the value of the property and the region of Spain where it’s located.

Selling your home to your children

For parents, your tax obligations are the same as if you simply passed your home onto your children – you will still be liable to pay the capital gains tax through your IRFP and the municipal tax.

Those who decide to buy their parents’ house from them must pay a Property Transfer Tax (ITP). The amount of this tax also depends on which region of Spain you live in and can vary between 6 and 11 percent.

EXPLAINED: How choosing the right region in Spain can save you thousands in inheritance tax

Common pitfalls

If you decide to sell your home to your children, remember that there must be an exchange of money, otherwise, it will still be counted as a gift. Your children must still purchase the property from you in the form of savings, a mortgage or a personal loan. If found out and there wasn’t actually an exchange of money, you could be fined.

You are also not allowed to sell your home to your children for an abnormally low price. Every home has a minimum value for tax purposes.

This value is calculated by the autonomous community in which it’s located. In some regions, the cadastral value is taken for reference, but each region has its own way of calculating it.

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For members


What the Euribor rise means for property buyers and owners in Spain

The rise in the Euribor interest rate, used to calculate mortgage payments in Spain, is causing big changes in the mortgage rates.

What the Euribor rise means for property buyers and owners in Spain

Looking to buy property in Spain? Already a homeowner here? Well, you may have heard something about rising interest rates recently.

Or perhaps changes to the terms of your mortgage. Or the Euribor – but what is it, and what’s going on?

What is Euribor?

In Spain, Euribor is the interest rate most often used to work out mortgage payments and to calculate both variable and fixed rates.

It is anchored to the interest rate set by the European Central Bank, and, as we are now seeing, quite responsive to global economic events.

It’s the interest rate that banks in the Euro Zone use to lend to each other, so when the base rate goes up, the Euribor does too, which sends mortgage interest rates across the Eurozone rising. 

Rising rates

Most Spanish mortgages with variable rates normally vary based on a variety of factors, but this number has been rising and in May 2022 saw figures of 0.240 percent (Tuesday May 17th), well above the average. 

The rises throughout May are leading many in Spain, and indeed across Europe, to wonder how high their mortgage rates can go, and when the rises will stop.

Banco de España has estimated that the increases could range from anything between €35 a month to an additional €400. Bankinter predicts the Euribor rate will finish the year at a staggering 0.40 percent, but, more encouragingly, Caixabank’s prediction puts it at just 0.13 percent by the end of 2022.

On, a website that tracks the index on a daily basis, they suggest that the market consensus predicts the Euribor will finish at around 0.3 percent at the end of the year, but could reach as high 0.8 percent in 2023.

All of them agree, and most other economic indicators suggest, that whatever the figure at the end of the year, it will remain positive, so it seems almost certain that mortgages will continue to rise throughout 2022 at the very least.

This instability, in addition to global inflation and supply chain problems, could mean that mortgage rates will be affected at least until 2023, with some predictors even signposting 2024 as the possible end of a rise in mortgage prices.

With things uncertain in the mortgage industry, and the world economy more broadly, perhaps you’re thinking of ways to try and insulate yourself from the climbing interest rates.

How to protect yourself from the rising rates

One way to weather the storm of interest rate increases is to change your mortgage from a variable to a fixed rate, either by negotiating with the your bank or by changing bank altogether – a process known as subrogation.

According to data from MyInvestor, during March and April the number of subrogations has started to rise.

Subrogation basically means switching the mortgage from one bank to another to change its interest rate. Although it does involve certain charges in order to do so – you pay the valuation of your house, which normally costs a few hundred euros, and a fee charged to the bank you are leaving, which can cost up to 2 percent of the outstanding amount – it could, and probably would, work out cheaper than paying the hiked interests rates over time.

You could also try and take out a new mortgage with another bank and use the borrowed money to settle the loan. This is, of course, a more expensive option as you have to pay the appraisal, the commission for early repayment of the current credit (again, up to 2 percent of the outstanding amount) and the expenses associated with its cancellation of registration, which normally runs to around €1,000.

READ ALSO: Spanish mortgages – Ten things foreigners should know before getting one