Donating money does not generate capital gains or losses for Personal Income Tax (IRPF)

The transfer of money as a donation is a frequent operation within the family sphere, especially in the transfer of funds from parents to children. Given the uncertainty regarding how this operation should be reflected in the income tax return, the Dirección General de Tributos (DGT) has issued a ruling that delimits the tax responsibility of both parties.

What the DGT has ruled

The query concerned the tax impact on Personal Income Tax (IRPF) regarding the donation of money. The body has determined that the donation of money generates neither a capital gain nor a capital loss for the donor. This criterion is based on Article 33.5 of the Law on Personal Income Tax (LIRPF), which establishes that losses derived from gratuitous inter vivos transfers cannot be computed for the determination of the taxable base.

On the other hand, regarding the recipient, the acquisition of money through donation is not subject to IRPF. This is because said operation is regulated by Law 29/1987 on Inheritance and Gift Tax, thus avoiding double taxation or an incorrect application of income tax regulations.

What it means for you

If you are an individual making a cash donation, you should keep the following points in mind:

• For the donor: The outflow of money from your assets will not allow you to declare a capital loss to reduce your IRPF taxable base.
• For the recipient: The money received does not constitute taxable income for IRPF, but the operation must be taxed in accordance with Inheritance and Gift Tax regulations.

This distinction is fundamental to avoid errors in tax settlements and to ensure that the nature of the transfer is treated under the corresponding regulatory framework.

What should be done

In an operation of this nature, it is necessary to verify compliance with the obligations derived from Inheritance and Gift Tax. Since every family and asset situation presents different nuances, it is necessary to assess each case individually to ensure the correct management of documentation and the settlement of the applicable taxes.