Spain: Tax implications for family loans and donations

In Spain, transferring money between family members requires careful documentation to avoid being classified as a gift by the Tax Agency (Hacienda). While receiving a loan is not considered taxable income for Personal Income Tax (IRPF) or Corporate Tax, it must be supported by a written contract. This contract should specify the lender, borrower, amount, term, interest rate, and payment method to prevent the authorities from treating the transfer as a disguised donation.

If a transfer is deemed a donation rather than a loan, it becomes subject to the Inheritance and Gift Tax (ISD). While any donation must be declared regardless of the amount, the 10,000 euro threshold serves as a control limit where the tax authorities are more likely to scrutinize movements between individuals to prevent money laundering or tax evasion.

Tax rates and exemptions for donations vary significantly across Spain, as the management of the ISD is devolved to the autonomous communities. The degree of kinship also dictates the tax burden, with closer relatives such as parents, children, or spouses typically benefiting from lower costs compared to cousins or unrelated individuals.