Donating a company to your children in Spain is a strategic decision that requires knowledge of legal and tax requirements and practices updated in 2025. Donating a company to your children not only involves formalities, but also requires careful planning to take advantage of tax benefits and avoid future problems. At Confianz we accompany families every step of the way for an efficient and surprise-free generational handover.
1 how to donate a company to your children in Spain legal and tax requirementes
To understand how to donate a company to your children in Spain, the current regulations must be reviewed. It is necessary that the company meets the definition of «family business» in article 4.8 of the Wealth Tax Law, avoiding wealth management or tax transparency. In addition, the donor must be over 65 years of age or permanently disabled, and no longer perform managerial functions or receive a salary for them.
The donee child must undertake to keep the gift for at least 10 years in order to retain the wealth tax exemption, a prerequisite that often distinguishes a gift from an inheritance.
how to donate a company to your children in spain tax benefits and community of madrid
2 how to donate a company to your children in Spain tax benefits and Community of Madrid
At the national level, donating a company to your children in Spain allows you to apply a 95% reduction in the taxable base for meeting the requirements of a family business. Furthermore, in regions such as Madrid, Andalusia, Castilla y León and Murcia, the ISD tax rebate is 99%.
As of 1 July 2025, Madrid maintains the 99% tax credit for transfers between parents and children (groups I and II) and extends the tax credit for siblings, aunts, uncles and nephews (group III) to 50%. The requirement of a public deed is also eliminated for donations up to €10,000, and amounts below €1,000 are exempted.
Therefore, donating a company to your children in Spain with tax support and regional relevance, especially in Madrid, is today efficient and less burdensome.
how to donate a company to your children in Spain comparative with inheritance and risks
3 how to donate a company to your children in Spain comparative with inheritance and risks
Knowing how to donate a company to your children in Spain means understanding the difference compared to an inheritance. In a donation, the requirements are stricter: the donor must prove that he/she has ceased to be a director, be over 65 years of age or disabled, and must keep what he/she has received for 10 years in order to enjoy exemptions that do not apply if this commitment is broken.
For tax purposes, in the gift the children assume the tax value of the donor (acquisition cost), not the current market value. This can lead to taxation on unrealised capital gains if the company is later sold. In contrast, in inheritance the valuation is updated, avoiding this prolonged tax burden.
In addition, the donor may have to pay personal income tax on the capital gain derived from the donation if it comes from assets with capital gains such as recently sold shares.
Therefore, although donating a company to your children in Spain offers tax advantages, it requires careful consideration of risks such as future tax burdens and loss of asset flexibility.
Practical tips that we recommend at Confianz
- Analyse the corporate structure and reform if necessary to meet «family business» requirements.
- Formalise the donation before a notary and file form 651 in the corresponding Autonomous Community within the following month.
- Evaluate tax scenarios, comparing donation versus inheritance, taking into account capital gains, personal income tax and severance requirements.
- Check regional bonuses, especially in Madrid from July 2025.
- Plan for the maintenance of tenure, ensuring the commitment of the children for 10 years for the preservation of exemptions.
- Provide for the donor’s personal income taxation if he transfers assets with capital gains.
- To have legal and tax advice, with a personalised and updated approach to regulatory changes in 2025.
In our firm we provide practical, humane support tailored to each family. We review the situation, design the best estate plan, manage formalities and support the execution so that the generational handover is completed smoothly.
We have the experience and the practical approach to ensure that the handover of your family business is done safely, efficiently and without the mistakes.