Value to declare for an inherited or donated property in Spain

Here are some tips to declare the fair value of the inherited or donated property in Spain, depending on your autonomous community and the type of property.

The donation of  property may be preferable to leaving the property for inheritance. Especially in some autonomous communities due to their taxation.

The donation of real estate in Spain has other tax consequences that must be known, in addition to the payment of Inheritance and Gift Tax.

With regard to the Inheritance and Gift Tax, the value of the donated or inherited property that you must declare is the real value that it has at the time of acquisition, reduced by deductible charges and debts. This value is, in principle, the one that the taxpayer declares (because it believes that it is correct), although the Administration can correct it and increase it if it considers it too low. Given that it is sometimes very difficult to value real estate, so that the valuation is correct and does not lead the taxpayer to make a mistake that involves a higher tax payment, we are going to give you the following tips.

When the Community of residence of the deceased has advantages in the succession between parents and children, making the tax very low or non-existent, the value that it would be interesting to assign would be as high as possible without exceeding the market value. The advantage of declaring a high value is that if it is decided to sell the property in the future, the profit to be declared in personal income tax will be smaller or the loss to be compensated greater. Given this, it must be taken into account that if the heir pays Estate Tax, he will have to declare the high value assigned in the inheritance tax and the cost of this tax will rise.

In Communities with fewer advantages in the succession between parents and children, and for taxable inheritances, the value will depend on the property in question:

Properties other than the habitual residence: If you do not intend to sell them, in general it is best to value them as low as possible to pay less Inheritance Tax, because being a progressive tax, the higher the value of the inherited assets, the more high is the percentage that is paid. To assign the lowest admissible value, it is best to stick to the value that the assets have according to the rules of the Wealth Tax. If you want to put the lowest possible value but do not want to risk a value check, you can use the value assigned by the Regional Ministry of Finance, although the Covid-19 crisis will surely have made the real value more lower than the one assigned by the Communities which is a single value for the whole year, and this can be a risk of a value check. If you intend to sell them immediately, the advisable value to declare is the market value, to obtain a lower profit or even a loss in the personal income tax of the heir. Although this can cause problems as we have said because the real value may be lower than that set by the Communities before the COVID crisis.

Property of residence: It may be interesting to declare it for the highest possible value within the market value, as long as this does not pay too much for the Inheritance Tax. Imputing a higher value normally will not entail an excessive increase in inheritance tax, since this tax is not paid for 95% of the amount of the inherited habitual residence when the ascendants, descendants and spouse acquire it with the limit of 122,606.47 euros (some Autonomous Communities have modified this limit). In this way, if after the years of permanence in the estate of the heir, necessary to not lose the right to the reduction, the heir wants to sell the house, the tax gain obtained will be less or it will be a loss, since for the calculation of the same will be used the value that was given in the inheritance tax. However, this advice is not so advantageous when the real value of the property is high and the heirs are few, since if they declared the real value they would greatly exceed the maximum reduction limit and then the payment of inheritance tax would be increased.

Value of the property in donations

In the Communities with advantages in the donation between ascendants and descendants, the value that would be interesting to assign would be the highest possible without exceeding the market value, for the same reasons that we have commented before in inheritance.

In the Communities without advantages in the donation, given the progressivity of the tax (the higher the value of the inherited assets, the greater the percentage to be paid), the most convenient thing is to value the properties as low as possible to pay less Gift Tax: the best thing is to stick to the value that the goods have according to the rules of the Wealth Tax. If you want to put the lowest possible value but do not want to run the risk of a value check, you can use the value assigned by the Regional Ministry of Finance, although as we have mentioned the Covid-19 crisis will surely have made the value The real value is lower than the one assigned by the Communities, which is a single value for the whole year, which can lead to a value check.

Please contact our inheritance Lawyer in Spain