Spain's tax authorities do not tax wedding gifts despite claims and law ambiguity

A claim has recently gone viral on social media warning newlyweds that the Spanish tax authorities will fine them if they fail to declare wedding gifts and transactions. The state tax agency has denied such claims, although regional laws can explain the confusion.

The regional government is responsible for monitoring the law on inheritance and gifts/donations, but even this body would not chase down the couple to declare wedding gifts, unless the amount transferred is very large or the transactions seems suspicious.

There is no evidence that any regional treasury has activated surveillance or inspection plans to pursue alleged tax fraud related to not declaring wedding gifts or any other type of gift.

They say that for rumours to be effective, they have to be based at least in part on a truth. In this case, it's true that, legally speaking, any gift we receive (whether money or property) should be subject to inheritance or gift tax, which doesn't establish any minimum exemption unless the transfer of money or property occurs between direct relatives.

To give you an idea, the tax rate for gifts starts at 7.65 per cent, so a gift of 200 euros (the kind usually given to cover the cost of a meal at a wedding) would be taxed at around 15 euros. The problem is that this theory has no practical application. "The reality is that these gifts, which are based on local customs or traditions, aren't taxable, not because they shouldn't be, but because they are accepted in practice," veteran tax advisor Rubén Candela says.

"In everyday life, there are many situations in which small amounts of money or gifts are exchanged: birthdays, family celebrations, occasional help between friends or relatives, which are part of social and economic routine," tax advisor Miriem Diouri says. "A gift or a small payment between private individuals is not the same as a large transfer without apparent cause. When the amounts are disproportionate or repeated in significant quantities, the tax authorities are more likely to consider it a donation with tax implications," she adds.

Diouri states that there has been no regulatory change or notification from the tax authorities to justify the surge in reports about wedding gifts.

What has changed is that the treasury, both at state and regional level, has more and more technological and data analysis tools that make it possible to cross-reference financial information and detect economic movements much more easily. The widespread use of digital transfers and Bizum, as opposed to the ever-decreasing use of cash, supports this trend.

Even so, Diouri believes that administrative action will continue to be guided by reasonable criteria. "The principle of proportionality and respect for social customs will continue being applied," she states.

In Candela's opinion, Inheritance and Gift Tax is "in dire need of a complete overhaul", as it dates back to 1987 and has very high rates because "back then nobody declared real estate values, and the legislator compensated for this by setting higher rates". "There are significant exemptions between direct relatives, but be aware that to be applicable, they must be documented in a public deed. Sometimes we see parents in our offices who have made substantial transfers to their children, for example, to buy a car, and they believe that the transfer alone is sufficient," he says.

There is no maximum amount of money that can be transferred without declaring it, but there are thresholds above which financial institutions must inform the treasury, in compliance with law 7/2012 of 27 October. In general, the threshold for transfers is set at 10,000 euros: it is not that transfers of a higher amount cannot be made, but that above that figure the bank has an obligation to report, regardless of the channel used.

In the case of cash transactions, the threshold from which financial institutions must report to the tax agency is 3,000 euros, for both deposits and withdrawals.

This reporting obligation does not automatically mean that the tax authorities will accuse those who carry out these operations of fraud, but rather that the tax authorities may, if they have suspicions, ask those involved about the origin of the money.