It is easy to confuse terms when it comes to taxes and even more so if they refer to words that are used on a daily basis as synonyms. This is the case of the differences between donations and donations, which refer to two very different tax actions and that you must take into account when filing your Income Tax return (a procedure that begins in Spain on April 3).
Although for the Royal Academy of Language (RAE) these are synonyms or related words, for the Tax Agency they are two different facts that are neither taxed the same nor do they do so in the same taxes.
What is a donation
A donation can be defined as a “liberality of someone who freely transmits something that belongs to them in favor of another person who accepts it” (this is how the RAE describes it).
In other words, donations are gifts given to another person. These gifts can be money or also things or services. For example, donating a home to a child or money to buy a house, but also paying a debt in another person’s name or fixing their car for free.
What is a donation
Donations are also gifts. In fact, the RAE defines them directly as a “gift, gift, assignment, especially for charitable or humanitarian purposes.”
This last meaning is the one given to donations in relation to taxes.
And, from a tax point of view, when you give money to an NGO or a Foundation, what you are making is a donation and not a donation. And this is because if it were a donation, the entity would have to pay taxes.
Tax differences between donation and gift
Different facts and different taxes. This is how donations and donations are taxed depending on the case.
How donations are taxed
Donations are taxed mainly in the Inheritance and Donation Tax within the ‘inter vivos’ part of the transfers.
From a tax point of view, there is no minimum exemption from taxation in the Donation Tax and taxes must always be paid for all donations received, since the donee is the one who pays the tax. With the law in hand, this affects all gifts received, even wedding gifts or grandma’s Christmas allowance.
However, for practical purposes, the Treasury does not pursue or investigate small donations, much less those related to traditions. Of course, the donation of money, a home, a car or an investment portfolio is on the treasury’s radar.
The Donation Tax is transferred to the autonomous communities, which have been adapting it to their needs. More and more include bonuses and reductions so that the amount payable is lower or even zero, especially among close relatives.
Donations can also be taxed in personal income tax. In this case, it is the donor who has to pay the tax when filing the income tax return. This happens when you donate an estate item.
For example, if you donate a home or a stock portfolio, for the treasury it will be the same as you would have sold the house or the stocks. By doing so, you will generate a capital gain or loss that will be taxed on income at a rate of between 19% and 23%.
In other words, you have to be careful with what you donate and how because you may end up paying more taxes than you thought for making a gift.
How donations are taxed
Donations are taxed in the income tax return and have a tax premium. One of the general deductions in personal income tax is the deduction for donations and other contributions.
Specifically, in 2023 income you can deduct 80% of the first 150 euros in donations to NGOs, foundations, public universities, museums…
You can also deduct 35% of amounts that exceed 150 euros. This percentage rises to 40% if you increase the amount of the donation to an entity that you have supported during the previous two years.
