Donations from fundraising campaigns are subject to Inheritance and Gift Tax

The legal nature of funds obtained through fundraising campaigns has been defined by the tax administration. In a recent binding ruling, the tax treatment applicable to amounts received free of charge in these types of operations has been specified.

What the DGT has ruled

The Dirección General de Tributos (DGT) establishes that amounts received without any consideration from the donor constitute an acquisition of goods and rights free of charge. Therefore, these operations fall under the figure of a donation or an inter vivos legal transaction.

In accordance with current regulations, Inheritance and Gift Tax (ISD) accrues at the moment the act of donation is carried out. In this scenario, the person or entity favored by the receipt of the funds holds the status of taxpayer for the tax.

What this means for you

If you are an individual receiving money free of charge through fundraising campaigns, these amounts are not exempt from taxation simply because of their origin. As it is a donation, the operation is subject to Inheritance and Gift Tax (ISD) in accordance with Law 29/1987.

It is important to distinguish that the DGT's competence is limited to the classification of the operation and the accrual of the tax. The application of specific rates, as well as the existence of possible reductions or allowances, will depend exclusively on the regulations of the Autonomous Community where the beneficiary is located.

What you should do

Upon receiving funds through these modalities, it is necessary to identify the applicable regional regulations to determine the real fiscal cost of the operation. Since the tax burden will vary significantly depending on the region, it is recommended to assess each particular case to determine the impact of the available allowances or reductions in the corresponding jurisdiction.