olivecake

I would like to give/loan (either is fine) around 20-30k GBP to my son who will start a business here, but am getting a bit lost in the Spanish tax system.

We actually both have UK accounts, and while he is not a resident in the UK any more I am still a resident in both countries. So one option could be transferring the money in the UK, but I am worried if this is allowed, and also what he would say to the tax office when he moves the money to Spain.

Or, is this possible to do in the Spanish side without paying some part of it away in taxes? From what I could understand, almost any amount as a gift is taxable here. So I guess the only options would be "giving" it as a loan, or an investment, but I couldn't find any information about this online.

Does anyone have any ideas or suggestions how I could do this?

christmasoompa

Just to clarify - where are you actually tax resident? You may split your time between both countries, but for things like healthcare and taxes, you can only be resident in one, so is that that UK or Spain? And where is 'here' that your son wants to start his business in, UK or Spain?

I've no idea on the answer to your question by the way, but suspect that those in the know may need to know which country you're tax resident in too to be able to give the best advice!

Loafing Along

Get good advice from a tax consultant but in broad outline a donation will be taxed while a loan will not, even though the Spanish tax resident receipiant will need to declare it the tax implication is zero. As a loan it will need to be documented with a time frame and a repayment plan

Fred James

If he is resident in Andalucia there will be no gift tax.

olivecake

Oh, sorry for the missing information.

I am actually still a tax resident in both the UK and Valencia Community. I've already contacted the tax office about that and been waiting for their specialist to call me to sort it all out so that I am only resident in Spain. My son is tax resident and planning to start the business in Madrid, which if I understand correctly is what matters (the recipient) in Spain?

I am reading now from gmtaxconsultancy website, that in Madrid gift tax is discounted by 99% between living family members, only that it must be made formal (I guess I or he just need to fill out a form somewhere?). So I assume this is 99% off the tax, which would be around 10% for this amount, so discounted to 0.1% tax to be paid of the total gift?

Apart from this, I assume this wouldn't affect his businesses tax/expenses situation correct?

As for making it a loan, this is also an option but I am wondering what rules there might be about how and when it is paid back, or what would happen if he wasn't able to pay it back? It sounds quite complicated, and the gestor fees to arrange it would be more than the gift tax anyway.

Thanks for all the advice and info so far, it is really helping to clear things up

Barriej

The first €100,000 are tax free for both gifts and inheritance here in the Valencia Community.
Although if the money were banked any interest gained would be fully taxed.

Don't loan the money thats complicated and you both may end up with tax issues.

olivecake

Ok, but if I am resident in Valencia, and he is in Madrid. Who's community decides the rules?

Barriej

I would assume the recipient would be the one taxed.

Fred James

Correct. With IHT/Gift tax it is always the recipient who pays and it is the recipients location that determines the rules.

Notdunroamin

You cannot be tax resident in two places at the same time!

olivecake

Well I am haha, and been paying 2 lots of tax on my pension for the last year as well... I'm trying to get out of it but isn't easy to do remotely.

Barriej

But you don't have to do it.
We are due to submit our return in 2022 for this year and the accountant who is sorting our paperwork has said that once you have filled your first return. The Spanish tax man can issue a letter that is sent to HMRC and they then take you off the UK tax system.

I informed HMRC when we moved in August last year and updated our postal address, they then messaged me telling me what Spain has to do, to complete the change.
Resident in Spain = pay tax here.
I have nothing in the UK except my private pension so it makes sense and is sooo easier.

This is the HMRC form.

https://assets.publishing.service.go...Individual.pdf

Lynn R

It's quite easy to do - I went through the process myself without using a gestor or accountant. The form comes in two versions, Spanish and English. Complete both, send the Spanish version to the main AEAT office for the province you live in (I attached a covering letter requesting them to issue me with a Certificado de Residencia Fiscal (Convenio). They will send the certificate to you by post (mine arrived after one week). Then send that, together with the English version of the form, to HMRC at the address shown on the form. They will then issue you with an NT (no tax) code to be used by your UK pension provider(s) - the only exception being UK Crown pensions which are only taxable in the UK but you will have a UK personal allowance to set against those, and they will refund you the tax you have paid on any non Crown pensions.

Fred James

Well, you are not tax resident in both countries haha. You may be paying tax in both but you can only be tax resident in one. Read the HMRC double taxation treaty for clarification.

christmasoompa

Assuming you're actually tax resident in Spain (as said above, you cannot be tax resident in two jurisdictions) you simply need to file a P85 with HMRC to tell them you're now living abroad. https://www.gov.uk/tax-right-retire-abroad-return-to-uk