According to the Rising Euribor, It Is Almost Impossible for Him to Pay the Monthly Installment

Author: E.C.

Source: elconfidencial.com

I want to gift my son 25,000 euros to help with his mortgage. He still owes the bank 170,000 euros on a variable interest rate, and with the rates rising, it is almost impossible for him to pay the monthly installment. What steps should I take to gift this money in the most cost-effective way?

According to Article 618 of the Civil Code, a donation is defined as “an act of liberality by which a person freely disposes of a thing in favor of another, who accepts it.”

Continuing with the basic terms, all persons who are able to contract and freely dispose of their goods are entitled to make donations, and all those who are not specifically incapacitated by law can accept them, according to Articles 624 and 625 of the Civil Code, respectively.

However, the donation is a transaction subject to tax within our country’s fiscal system, with the tax liability falling on the recipient of the donation, also known as the donee or acceptor.

Nevertheless, this tax is subject to regulation by the autonomous communities, so we must consider the law of the autonomous community where your son resides to determine how much he will need to pay in taxes on the donation.

Donations from parents to children usually receive a substantial reduction in a large number of autonomous communities, meaning that the tax burden is lower compared to the rate established by the State based on the donated amount.

For example, considering these reductions, in Cantabria, there is a 100% deduction, meaning no tax is owed on the donation. In Madrid, Andalusia, Castilla y León, or Murcia, the deduction is 99%, with only 1% tax due. In Castilla-La Mancha, it is 95%, and in other regions such as Catalonia or Galicia, there are rates for donations between close relatives of 5% and 9%, respectively.

In conclusion, the financial burden of the donation will depend on your son’s place of residence, potentially resulting in a significantly reduced tax amount on the received donation.