Taxation in Madrid
2026-11-06
Gift tax in Madrid: the 99% rebate, deadlines and gifting a property
Gift tax in Madrid is, for most families, a modest cost: the Community of Madrid applies a 99% rebate on the tax charge when the donee is a descendant, spouse, ascendant or adopter or adoptee of the donor (Groups I and II) and the gift is formalised in a public document. Even so, there are deadlines, forms and valuation rules to understand before signing, above all when the gift is a home.
This guide summarises what the tax covers, which rebates and reductions the Community of Madrid currently provides, how a donated property is valued and which other taxes may arise. If you are considering how to pass a property on within the family, you can compare this with the option of selling a property in Madrid or explore our luxury homes for sale in Madrid.
What gift tax covers and who files the return
According to the Community of Madrid, the tax is declared by individuals who receive assets or rights free of charge: that is, the donee, not the donor. Legal entities do not file this return, because a gift to a company is taxed under Corporate Income Tax.
Jurisdiction works as follows: real estate is declared in the Community of Madrid if it is located there; other assets, such as cash, are taxed in Madrid if the donee had their tax residence in the region for the longest part of the five years before the gift.
Gift tax rebates in Madrid
These are the figures published by the Community of Madrid on its gift tax page, last updated on 1 July 2026:
- 99% rebate on gifts formalised in a public document in favour of descendants, spouses, ascendants and adopters or adoptees (Groups I and II).
- 99% also in a private document, since 1 July 2025, when the gift is between €1,000.01 and €10,000 and the donee belongs to Groups I or II.
- 50% rebate in a public document for collateral relatives of the second and third degree and in-laws of descendants and ascendants (siblings, uncles and aunts, nephews and nieces, sons- or daughters-in-law, for example), since 1 July 2025.
- 100% rebate on gifts of up to €1,000 from individuals, whatever the family relationship, since 1 July 2025.
For these purposes, gifts from the same donor to the same donee made in the previous three years are added together.
How a donated home is valued
The property is valued at the date of the gift, which is generally the date of the deed. For tax events arising since 1 January 2022, the cadastral reference value is used, unless the value declared by the parties is higher.
The Community of Madrid itself gives an illustrative example: for a €200,000 property gifted from father to son, with a tax charge of €31,621.21, the 99% rebate leaves an amount payable of €316.21. The actual charge depends on the taxable base, the applicable scale of rates and any previous gifts from the same donor. For larger homes, such as those found in the Salamanca district, it is worth calculating the charge before signing.
Gifting money to buy a home
It is a common arrangement within families: parents give funds to a child so that they can buy their residence. The Community of Madrid provides a 100% reduction, capped at €250,000, for cash gifts formalised in a public document in favour of a spouse, children, grandchildren or siblings. The amount must be used within one year to acquire a main residence, shares or holdings in certain companies, or assets used in a business or professional activity, and the document must state that purpose.
Since 1 July 2025 there is also a 100% reduction, capped at €10,000, for gifts made in a private document; if gifts from the same donor to the same donee over three years exceed that figure, the reduction requires a public document. If the money is intended for a purchase, you may wish to read about the property buying process and the costs of buying a home in Madrid.
Deadline and how to file Form 651
The filing deadline is 30 working days from the day after the act or contract subject to tax, not counting Saturdays, Sundays or public holidays. The return is filed as a self-assessment using Form 651. Since the deed usually fixes the valuation date, it is advisable to coordinate the signing at the notary with the preparation of the self-assessment.
Other taxes when gifting a property
Gifting a home is not limited to gift tax. Other items need to be reviewed:
- Municipal capital gains tax (plusvalía). This is a city council tax and, for transfers free of charge, the taxpayer is the person who acquires the property, that is, the donee. The self-assessment deadline for transfers between living persons is 30 working days, according to Madrid City Council. You can find more in our guide to municipal capital gains tax in Madrid.
- The donor’s income tax (IRPF). A free transfer of property may have an effect on the donor’s tax return; it is advisable to review this with a tax adviser before signing.
- Notary and land registry. The public deed and its registration carry their own costs, in addition to the taxes.
Gift, inherit or sell: what to weigh up
When a family considers passing on a property, three routes are usually compared. A lifetime gift fixes the value and the tax now and allows the donee to use the property immediately. An inheritance is deferred until death and is taxed under inheritance tax in Madrid, where a 99% rebate also applies. And a sale turns the asset into liquidity, with its own tax treatment.
An intermediate option is to gift only the bare ownership, keeping the usufruct. And if the family’s wealth is substantial, wealth tax in Madrid should also be borne in mind. Every situation is different, and the strategy should be validated by a tax adviser.
To decide on the basis of facts, the first step is usually to know the market value of the property. You can request a property valuation in confidence and, if you ultimately choose to sell, find out how to sell a property in Madrid with the support of BARNES Madrid.
Frequently asked questions
How much is paid when gifting a home to a child in Madrid?
The tax charge is calculated by applying the tax scale to the value of the property (the cadastral reference value, unless the declared value is higher) and, if the gift is formalised in a public document in favour of a child, a 99% rebate applies to the charge. In the Community of Madrid’s example, a charge of €31,621.21 falls to €316.21.
Can money be gifted to a child in Madrid without paying tax?
There are 100% rebates and reductions in specific cases: gifts of up to €1,000 carry a 100% rebate and, for cash gifts in a public document, the 100% reduction goes up to €250,000 if the money is used within one year for a main residence or other permitted purposes.
When and how is Form 651 filed?
Within 30 working days from the day after the gift, by self-assessment. Real estate is declared in the Community of Madrid if it is located there.
Who pays municipal capital gains tax on a gift?
The donee, that is, the person who acquires the property. It is self-assessed with the city council within 30 working days of the transfer.
Discover homes for sale in Madrid
How BARNES Madrid can help
At BARNES Madrid we support owners and families who wish to value, sell or pass on a property in Madrid, as well as Spanish and international buyers throughout the process. To discuss your situation discreetly, contact BARNES Madrid; if you would like to know the value of your home, you can request a property valuation.
At BARNES Madrid we support domestic and international buyers throughout the process, from selecting the home to signing. To receive a personalised selection, contact BARNES Madrid; if you are an owner, you can request a property valuation.
The information in this article is indicative and based on that published by the Community of Madrid (comunidad.madrid) and Madrid City Council (agenciatributaria.madrid.es), consulted on 3 November 2026. Catalogue references correspond to the properties listed by BARNES Madrid as at 13 October 2026. It does not replace professional tax or legal advice.