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The planning of family wealth is a matter that is often raised with an apparently simple question: is it better to give the assets to the children during one’s lifetime or to wait for them to receive them through an inheritance? The answer, however, is not universal. In Catalunya, the tax treatment of donations and successions presents relevant differences that can substantially alter the final cost of the transfer of assets.
Lawyers and tax advisers agree that each case must be analysed on an individual basis. Factors such as the amount of the estate, the type of assets intended to be transferred or the personal situation of the children may tilt the balance towards one option or the other.
Donations between parents and children are taxed in Catalunya through the Inheritance and Gift Tax. When they are formalised before a notary, a reduced scale is applied with relatively moderate tax rates: 5% for the first 200,000 euros, 7% between 200,001 and 600,000 euros and 9% above that amount.
By contrast, if the donation is not formalised before a notary, the general tax scale applies, which is significantly higher. In this case, the initial rate is 7% up to 50,000 euros and increases progressively until reaching higher percentages.
This difference means that, in general, when the donation exceeds 50,000 euros it is fiscally more convenient to formalise it before a notary, despite the cost of notarial fees.
Catalan regulations also provide for certain reductions with the aim of facilitating young people’s access to housing. Specifically, when a donation is intended for the acquisition of the first primary residence and the beneficiary is under 36 years of age, a 95% reduction of the tax may be applied.
However, this reduction requires that the donation be formalised in a public deed and that certain requirements and limits established by tax regulations be complied with.
When the donation does not consist of money but of a real estate property, taxation may be more complex.
On the one hand, the donor may have to pay tax under the Personal Income Tax (IRPF) if the current value of the property is higher than the value for which it was acquired. In such a case, a capital gain is generated that must be included in the income tax return.
On the other hand, the beneficiary of the donation will have to assume payment of the municipal capital gains tax, a tax that levies the increase in value of urban land.
These two tax burdens can turn an apparently simple transaction into a decision that requires a detailed prior analysis.
In the case of inheritances, Catalan regulations establish certain reductions that may considerably reduce the tax burden.
Children are entitled to a reduction of 100,000 euros in the Inheritance Tax. This means that the first 100,000 euros received through inheritance are exempt from taxation. Only the amount exceeding this threshold is subject to a progressive scale.
This exempt minimum may increase in certain situations, such as in cases of disability or depending on the age of the heir, up to a maximum of 650,000 euros.
In addition, the regulations provide for other tax benefits. One of the most relevant is the 95% reduction of the value of the deceased’s primary residence, provided that the heirs maintain ownership for at least five years.
There is also a progressive tax credit on the final tax liability that may reach up to 50%, although it decreases as the inherited estate increases.
Practical examples show that, in many cases, the transfer of wealth through inheritance may be fiscally more favourable than a donation during one’s lifetime.
For example, in an estate of 150,000 euros, a donation formalised before a notary could generate an approximate tax cost of 7,500 euros, whereas in the case of inheritance the taxation could be reduced to just over 1,400 euros thanks to the 100,000-euro reduction.
In larger estates, such as 300,000 euros, the difference continues to be significant: a donation could entail a tax burden of around 17,000 euros, while the inheritance could be close to 10,000 euros.
Despite these differences, experts recall that the decision should not be based exclusively on the immediate tax cost. Donations may respond to other objectives, such as helping children at specific moments of their lives —for example, in the purchase of a home— or advancing part of the family estate.
In this sense, estate planning becomes a key tool for optimising the transfer of assets between generations and avoiding unnecessary tax costs.
Ultimately, before making a decision it is advisable to carefully analyse each specific case and assess both the tax aspects and the family and patrimonial needs.
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