Jon-Bxl

Hi

Charity donations can be an emotive subject, but I hope we can have a technical discussion about charity in Spain.. without it going off the rails!

In this post I am asking about tax relief on contributions and the equivalent of UK’s excellent ‘Gift Aid’ programme. Just in case you don’t know its nicely explained here Gift aid

Note I’m not ‘pushing’ this excellent charity, just using their neat explanation on the website that apply to all UK registered charities:

I have a few questions, please – but relating to Spain. I am assuming here that people are taxpayers. But at the end propose a tax-avoidance scheme, that I think is an interesting one... and like all avoidance schemes are legal. However this one is less (or not-at-all) questionable than some of the stories we hear of in the press... and all (or lets say 'most') lower rate tax payers (or non-tax payers) can use it to greater gain.

Q1: As many already know: With UK Gift Aid there is a simple form to complete that allows 4 years of back payments and allows you to register future contributions. Because you are contributing NET of tax (you’ve paid tax on your salary already) and contributions are Tax EXEMPT, the Government (HMG) will pay the tax they’ve taken from you, to the charity. By doing this simple form your contribution is increased by 25%. So say you pay £100... the charity gets £125. Question 1: Is there a similar (and simple!) process in Spain, please?

Q2: In the UK Higher rate taxpayers also get back the additional taxes they paid through the tax return form. Meaning in this example 1. You pay £100 as before: 2. The Charity gets £125 – 3. BUT you get back another £25 rebate from HMG when you've done your return. Effectively meaning it ‘cost you’ £75. Not bad eh? They get £125 and you’ve effectively paid £75.
(Meaning if you wanted to pay a net of £100 out of your pocket. Give the charity £133.33, they get £166.67 and you get a rebate of the £33.33 – making you pay £100 net, but the charity gets a load more).

As long as you've paid higher rate tax on more than you've contributed, you can give it all back to charity. (I know of people that purposely do this as they are upset with the government and prefer to give to charity at no net cost to them): The more you give the more they get (up to the taxable income you've claimed back) Question 2: Is there a similar (and simple!) process in Spain, please?

Q3, Q4 Maximising your contribution: I’ve believe that this is possible in the UK. Lets assume you are either a non-taxpayer or a lower rate taxpayer.. but you want the charity to get the maximum ‘bang for the buck’.

In the UK you can make a gift-of-money to a friend. If you outlive that gift by 7 years... there’s no tax to pay by your friend...and its exempt from your estate.
1. Find a friend who is a higher rate taxpayer.
2. Gift him the money
3. He pays the charity and they get an additional 25%
4. He gets the 25% as a rebate when the return is processed... and gifts it back to you... (various other possibilities with the refund)
Question 3: Is there a similar (and simple!) process in Spain, please?

I know that in Belgium the gift-of-money only has a 3 year period, after that its tax exempt, so its 'better' than the UK’s 7 years.
I realise that they actual discussion may depend on each persons personal arrangements but hope we can have a discussion about the topic in general, and its suitability in Spain, in a general case.

I realise I may have opened a hornets nest of ‘discussion topics’ e.g charity requests at Xmas and other times, the problems with charities and (heaven forbid) tax avoidance, but I hope this subject is interesting to some people as I think that many will agree that the ‘right charities’ do a wonderful job and if there is a simple way – like the UK’s simple Gift Aid scheme, we should use it!

Thanks in advance for your replies!

Jon

snikpoh

My eldest has recently left school to go on to university in Spain - he was at a concertatdo.

As part of the cost of his Bachi schooling, we had to make a regular, monthly, 'charitable' donation. At the end of the year, we were given the necessary paperwork which we submitted with our annual tax return.

No fuss, no problems, this donation was accepted by hacienda and offset against our tax bill.

Fred James

There is no exempt period for gifts of any kind.

The tax is the same as IHT and becomes payable immediately. Gifts to charities are not subject to gift tax - that only applies to individuals.

Jon-Bxl

Thanks Fred. Wow thats tough. So RECEIVING a gift is taxed as IHT even if living!

So if you gift a friend in the UK as in the higher rate example above and (s)he puts it into charity... would you pay Spanish tax on the giving of that gift, do you think?

Is this a way around it, do you think?

Jon

Fred James

A non resident only pays tax if the asset gifted (or bequeathed) was in Spain.

Clearly that would apply to property, but cash is a different matter, especially if the cash was in a UK bank account.

On that basis your cunning plan may well work.

rspltd

I think you will find it less easy to define a charity in Spain than in the UK. There appears to be no equivalent of the Charity Commision nor does there appear to be a registration body. A lot of 'charities' display a number but this only seems to demonstrate that they have a tax registration and can obtain tax advantages.

Jon-Bxl

Thanks for the feedbacks. I dont want to sound negative but I would worry about the fact there is no commission and I would fear that there are less controls with the money. In the UK we have heard a lot of times about excessive costs in some charities and I do think the UK are leading the way with regulation etc. I would therefore personally prefer to invest in a UK charity that does what I want locally or internationally... and use the 'cunning plan'

The gift aid is an excellent scheme as you 'see' right away the money the charity gets. In Spain you can deduct, but you have to calculate the refund if you want an elevated contribution. I think the UK have a 'world class' solution IMO.

Also its odd that gifts are taxed, say a parent helps a child with a house purchase - its highly taxed. I'll bet that many dont claim this - adding to a more lax attitude...

Thanks
Jon

snikpoh

Gifts are also taxed in UK but there are conditions and limits below which no tax is paid. In Spain, it seems the limit is 0 - welcome to Spain.

It's just different!

Fred James

As with Inheritance Tax, certain areas have special rules for gifts for children to buy their first home and in some cases, gifts to children to buy a business or share in a business.

These exemptions are often severely limited based on the wealth and income of the donor and donee.

Jon-Bxl

Sure as I mentioned in the OP re gifts and UK.

Looks like Spain is really tough on gifts - which I think would make people under or not report.

Even the strict rules that Fred says are tough.. and would encourage poor reporting in some cases

Thanks

Jon

Fred James

As with Inheritance Tax, certain areas have special rules for gifts for children to buy their first home and in some cases, gifts to children to buy a business or share in a business.

These allowances are often severely limited based on the wealth and income of the donor and donee.