Donation of money: determining the applicable Autonomous Community

Determining where to file the Inheritance and Gift Tax (ISD) return is a critical aspect of asset transfers. Recently, the Dirección General de Tributos (DGT) has clarified the rules for establishing which regional regulations should apply when the object of the donation is money.

What the DGT has ruled

The DGT has established that the donation of money, as it is a movable asset, is taxed in the Autonomous Community where the donee has their habitual residence on the date the tax liability arises. To determine this residence, the administration relies on the following criteria:

• Permanence: Habitual residence is considered to be the place where the person has stayed for more days during the five years prior to the accrual.
• Economic interests: In the event that a person has not stayed more than 183 days in a specific territory, they will be considered a resident of the place where the core of their activities or economic interests is located.

This criterion is based on Law 29/1987 on Inheritance and Gift Tax, Law 22/2009, and the General Tax Law 58/2003.

What this means for you

If you are the recipient of a donation of money, it is not the location of the donor that determines the tax, but your own habitual residence. This implies that the tax burden and applicable allowances will depend strictly on the Autonomous Community where you legally reside according to the aforementioned criteria of permanence or economic interests.

For residents abroad or individuals with mobility between territories, proving habitual residence is a decisive factor in avoiding errors in the tax settlement and potential requests for information from the Administration.

What you should do

It is necessary to accurately verify the place of habitual residence before proceeding with the settlement of the donation. Correctly documenting permanence in a territory or the location of economic interests is fundamental to applying the correct regional regulations. Since residence is analyzed over a five-year period, it is important to have the necessary information to prove this data to the tax authority.