This is how the IRS will penalize transfers between parents and children with fines

Money transfers between parents and children have been a common practice in many Spanish families. However, the Tax Agency has focused on these operations to prevent them from being used as a mechanism to evade tax payments.

Starting in 2025, any financial movement between family members exceeding certain thresholds will be subject to greater scrutiny, with penalties for those attempting to conceal undeclared donations.

The main goal of the Tax Agency is to prevent hidden donations from being made without paying the corresponding Inheritance and Gift Tax.

To achieve this, banks are required to automatically report any transfer exceeding 3,000 euros (3,281 dollars). This will allow the Tax Agency to identify potential irregularities and, if deemed necessary, initiate investigations into the origin and destination of the money.

If the transferred amount reaches 6,000 euros (6,562 dollars), the Tax Agency may request additional documentation to verify that the fund movement complies with regulations.

In cases where an undeclared donation is detected, financial penalties will be imposed, which may include surcharges and late payment interest.

Greater control over the use of cash

The tightening of control measures not only affects bank transfers. Restrictions on the use of cash have also been increased.

The Tax Agency closely monitors payments made with 500 euro bills, checks, and other instruments that may facilitate circulation without leaving a trace. Additionally, any cash deposit exceeding 1,000 euros (1,094 dollars) will be reviewed by banks before being processed.

Inheritance and Gift Tax: differences between autonomous communities

The payment of the Inheritance and Gift Tax varies significantly depending on the autonomous community where the transaction takes place.

Some regions have applied bonuses that drastically reduce the tax burden, while others maintain a stricter tax regime. Below are some of the most relevant changes that will take effect in 2025:

Madrid: The bonus for inheritances between siblings and nephews increases from 25% to 50%.

Catalonia: Descendants under 21 years old can receive up to 100,000 euros (109,375 dollars) without taxation.

Valencian Community: A 99% bonus will be applied to inheritances due to death.

Andalusia: Maintains the 99% exemption on inheritances between direct relatives.

Extremadura: The 99% bonus extends to nephews and stepchildren.

Galicia: Exempts the payment of this tax on inheritances under one million euros (1,093,750 dollars) between parents and children.

Basque Country and Navarre: Offer reduced rates or exemptions for smaller inheritances.

Consequences for taxpayers

With these measures, the Tax Agency strengthens its control over family transfers, ensuring that all operations are carried out within the legal framework.

Citizens will need to be more careful when making money movements between family members, as any irregularity can lead to penalties.

To avoid problems, it is advisable to inform the Tax Agency of any significant money transfer and, in case of doubt, consult with a tax advisor.

Compliance with regulations is essential to avoid fines and ensure that all economic transactions comply with the law.