Donation of real estate in Tenerife
Are you considering donating your property in Spain, specifically in Tenerife - to your children? (A very good idea that will save you thousands of euros!)
You have worked, saved and invested in an apartment or house that meets all your needs and want to leave something to your wife or children, but you are a little afraid that they will have to pay a lot of money in taxes to the government?
The donation of real estate in Tenerife to your loved ones is an excellent solution to stop the high costs that are normally associated with death.
But what is a donation?
A donation is an agreement whereby a donor irrevocably (and free of charge) renounces his/her right to a property (moveable or immovable) in favour of a beneficiary who accepts this property explicitly. In other words: you give your property to your child(ren) without them paying you anything in return.
Donations of real estate must always be made by Notarial deed. This deed is registered and the beneficiary (e.g. your children) must pay a small 'Right of Donation' to the government.
Usufruct or technical ownership?
Usufruct: the right to enjoy the use and advantages of another's property short of the destruction or waste of its substance.
With the donation, you can donate the entire property as well as only the technical ownership. If you only donate the technical ownership, retaining the usufruct for life, then your children will become owners but cannot dispose of it without your permission. As 'usufruct', you continue to live in the property, retaining all rights and obligations relating to it - including responsibility for any taxes and revenues, but when you die, your children won't have any Inheritance Tax to pay.
What are the costs of the donation?
The donation is made official via a deed executed at a Notary's office. You pay a 'Right of Donation', the Notary's fee and various costs (stamps, researches, mortgage, etc.). The amount of the 'Right of Donation' varies according to the value of the asset transferred and the degree of kinship between donor and beneficiary.
The Right of Donation in the Canary Islands is calculated as follows:
- It is based on the gross value of the property received by the beneficiary
- At a flat rate (at time of writing, for EU residents) currently of 0.10%.
- At a different rate, depending on the degree of kinship between the donor and the beneficiary (the further apart the degree of kinship, the higher the rate)