There have been several rumours circulating online and reports in the Spanish media recently stating that Spain’s tax authorities can demand payments from adult children who live rent-free in their parents’ property.
Several renowned Spanish news websites have been running articles claiming that not charging your children rent for living in your Spanish property is seen as a type of donation or gift by the Spanish taxman, and that it could be subject to gift tax or even personal income tax, as it’s a clear economic benefit.
Some of these news outlets have claimed that this is particularly the case when children live rent free in a second home.
This has set alarm bells ringing in Spain as many adults cannot afford a home of their own. The average age for leaving the nest in Spain is 30.4 years old, and in many cases, families who own a second home let their adult offspring move into them.
Thankfully, these reports have been proven to be false, thanks to an investigation by Spanish national broadcaster RTVE’s fact-checking branch.
Spain’s Ministry of Finance has confirmed to VerificaRTVE that adult children living at their parents’ home “has never been considered a tax risk” and denies any legal change.
GESTHA, the workers’ union of the Ministry of Finance has also ruled out the possibility of it being considered a donation.
“The Tax Office’s criterion is that, if a child or a relative up to the third degree declares themselves to be in a precarious situation, they can use this second residence,” Carlos Cruzado president of GESTHA confirmed.
This means that even if a child or other family member is living rent-free in another property owned by the parents, not the one they currently live in – and they do so because they can’t afford to pay rent for example – it will not trigger any tax obligations.
READ ALSO: Can you sign over your Spanish property to your children without paying tax?
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When second homes are owned, however, there is a tax to pay, but it’s not because of the fact that a family member is living there, it’s simply levied because it not the taxpayer’s primary residence.
This is equal to 2 percent of the property’s cadastral value, which is reduced to 1.1 percent in certain cases .
Cruzado also dismisses the possibility that the Spanish Tax Agency could consider a child living in their parents’ property a “disguised donation”. According to him this matter falls under the jurisdiction of the regional tax authorities, as well, not the Hacienda.
There is also no reference to a relative living in your property as being considered a donation in the Inheritance and Gift Tax Law and this has not been changed since 2022.
It’s a different story altogether if you sign over your property to your children and put it in their name, however. In this case, your children are not simply living rent-free, they actually own the home.
In this case, while they will avoid paying inheritance tax, they will still have to pay gift tax and you will still have to pay capital gains tax and possibly municipal gains tax too.
