Donations will be taxed in the Autonomous Community where you reside for the most days in five years
Determining the regulations applicable to Inheritance and Gift Tax (ISD) is a critical aspect for those receiving assets in Spain. An error in identifying the Autonomous Community for taxation can lead to an incorrect tax settlement.
What the DGT has resolved
The Dirección General de Tributos (DGT) has clarified the criteria for determining habitual residence in an Autonomous Community for ISD purposes. According to the ruling, for a transaction to be taxed in a specific region, the donee must be a resident in Spain and have their habitual residence in said Community on the date of accrual.
The key criterion is temporal permanence: habitual residence is established by the place where the greatest number of days has been spent during the period of the five years immediately preceding the accrual of the tax obligation. It is important to highlight that it is not required to have spent half plus one of the days in a region; it is sufficient that there is no other Autonomous Community with a higher number of days of stay during that five-year period.
What this means for you
This criterion directly affects two main profiles:
- Foreign residents moving to Spain: Upon becoming tax residents, they must analyze their history of stay in the various autonomous communities during the last five years to know which regulations will be applied to them.
- Natural persons receiving donations: The tax burden will depend on the donee's residency history, not on the location of the assets or the donor.
The applicable regulations are governed by Law 29/1987, Law 22/2009, and Law 35/2006, which requires rigorous control of stay records within the national territory.
What should be done
In the event of a donation, it is necessary to perform a precise count of the days of stay in each Autonomous Community during the previous five years. Since habitual residence is defined by the majority of days, a change of address or a prolonged stay in a different region can significantly alter the amount of tax to be paid. It is recommended to assess each particular situation to ensure that the settlement is carried out in accordance with the regulations of the community that corresponds by law.
Frequently asked questions
- Is it necessary to have spent more than half of the days in an Autonomous Community?
- No, it is sufficient that the number of days spent in that community is greater than in any other Autonomous Community in the last five years.
- What happens if a foreigner becomes a resident in Spain?
- They must determine their community of taxation based on where they have spent the most days during the five years prior to the donation.