Housing donations increase due to fear of tax reforms in Spain

by Lorraine Williamson
housing donations

MADRID – The threat of tax harmonisation between the different Spanish sub-regions has led to a significant increase in housing donations in those communities where this is most beneficial. 

Madrid, Murcia and Andalucia, where the gift exemption is close to 100%, showed the biggest increase. This is despite the national average falling by 3.46%. 

Madrid outperforms 

In Andalucia, the number of transactions rose from 531 in February 2020 to 546 in February this year. That is an increase of 2.82%, according to statistics on transfers of property rights published by the National Institute of Statistics (INE). The increase was 6.47% in Murcia and in the community of Madrid there was even an increase of 31.44%. 

In total, there were 418 registered donations in the Madrid region. This compares to 318 in February 2020, just before the state of alert was declared. It is the highest number measured in the month of February in the past six years (in 2015 the number was 466). Furthermore, it is related to taxpayers’ fears of possible increases in inheritance and gift taxes after the May 4 elections.  

Doubts sown 

Socialist candidate Ángel Gabilondo has ruled out any changes to taxes for at least the next two years. And despite Conservative PP candidate Isabel Díaz Ayuso also not proposing any changes in this area, the departure of Pablo Iglesias of Unidas Podemos to Madrid has sown doubt about possible increases in property, inheritance or income taxes. 

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And this is especially noticeable in Madrid. Although there are other reasons to explain the increase there, as with other communities where exemptions on gifts are high. Currently, Madrid deducts 99% of inheritances and gifts to direct heirs. Coupled with the 100% discount on wealth tax, this has led other regions to call Madrid a ‘tax haven’ in the country and accuse it of ‘tax dumping’. 

Origins in 2019 

This has led to Pedro Sánchez’s government recently putting forward the idea of national tax harmonisation. Consequently, this is causing concern, especially since the coalition government of PSOE and Unidas Podemos came to power and both parties committed to greater tax reform. 

That happened in December 2019 and two months later, in February 2020, housing donations peaked in the INE’s historic series. In February last year, 2,453 such donations were recorded and only the first lockdown prevented further escalation. In the month of May, the numbers started to rise again.  And February of this year came close to last year’s maximum with 2,368 donations. 

Slight decrease in favourable to Cantabria 

Of all the regions, Cantabria offers the most advantageous rate of 100% on the gift tax. It is the only region with favourable conditions, where the number of donated properties fell from 46 in February 2020 to 45 in February 2021. 

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