Tax authorities has the obligation to control all the flow and movement of money in Spain, including transfers between parents and children. For this reason, banks are obliged to communicate to the Tax Agency any movement that may be suspicious, with the aim of preventing illegal activities such as tax fraud or money laundering. Although The Treasury does not establish specific limits for transfers between parents and children or other family members, but it can investigate any operation in which irregularities or a lack of adequate justification are detected..
The obligation of financial entities to report to the Treasury on suspicious operations is regulated in article 93 of the General Tax Law, available in this Official State Gazette (BOE), with the purpose of preventing tax fraud and illicit activities. In this sense, citizens must be aware of what is allowed and what is not, since the “I didn’t know that wasn’t allowed.” will not be valid, since the law does not excuse compliance, as established in article 6.1 of the Civil Code, which states: “Ignorance of the laws does not excuse compliance.”
Regarding transfers made between parents and children, in what cases can the Treasury sanction? To answer this question, it is necessary go to Law 7/2012, of October 29which regulates measures to combat tax fraud.
Maximum amounts controlled by the Treasury
The Law 7/2012 regulates various mechanisms for the prevention and fight against tax fraud, among which the limitation of cash payments stands out. According to this regulation, the limit for cash payments is 2,500 euros when at least one of the parties to the operation acts as an entrepreneur or professional. This limit increases to 15,000 euros if the payer is a natural person without tax domicile in Spain who does not act as a businessman or professional. In this context, this rule does not affect transactions between parents and children on a personal level, unless there is a commercial or professional relationship between both parties (for example, if they both manage businesses and carry out transactions with each other).
As for transfers between parents and children, these are allowed, but The Treasury can monitor them to avoid possible tax fraudsuch as hiding donations, but not because it is between parents and children, since it acts impartially and indie. Therefore, it is essential to understand the difference between a donation and a loansince the tax treatment of both operations is different.
Parent-child donations
According to the Law 29/1987of December 18, of the Inheritance and Donation Tax (ISD), the tMoney transfers between parents and children that are not justified as loans can be interpreted by the Treasury as donations.. These donations are subject to the ISD, the amount of which varies depending on the autonomous community and the degree of relationship between the donor and the recipient. In the case of parents and children, significant reductions are generally applied when paying this tax, depending on regional regulations.
The Real Decree 1629/1991which regulates the ISD Regulations, establishes the procedures to declare and settle this tax. It is mandatory to present the corresponding model (such as Model 651 for donations) in the tax administration of the corresponding autonomous community.
Failure to declare a donation can lead to serious penalties, including late payment interest and fines ranging between 50% and 150% of the undeclared amountin accordance with the provisions of the General Tax Law (Law 58/2003, of December 17).
Unjustified income
If the Treasury considers that recurring transfers between parents and children are undeclared income or disguised donations, it could begin an investigation. In such case, such transfers may be subject to Personal Income Tax (IRPF), regulated by Law 35/2006November 28.
If irregularities are detected after the investigation, the Treasury could interpret these income as a serious tax violation. This would entail sanctions that start from the 50% of the undeclared amountas established in the General Tax Law.
Parent-child loans
If the transfer of money between parents and children is intended to be a loanit is advisable to formalize the operation through a private contract or public deed. This document must detail the conditions of the loan (such as terms and, where applicable, interest) to prevent the Treasury from considering it a donation.
In addition, the loan must be communicated to the tax administration through Form 600, regulated in each autonomous community for the Tax on Property Transfers and Documented Legal Acts (ITPAJD). Although this tax is not normally payable if the loan does not generate interest, the presentation of the model is mandatory to justify the operation and avoid problems with the Treasury.
What happens with Bizum and cash
In the case of transfers made through Bizum, these are subject to the same tax regulations as other transfer methods. In this sense, we must be calm, since the Treasury will not investigate a Bizum of 20 euros sent to a parent, child or family member, since the amount is tiny, but certain limits must still be taken into account. If the amounts accumulated during the fiscal year exceed 10,000 euros, they must be included in the income tax return.considering the total sum of the operations carried out through Bizum.
On the other hand, with respect to cash, banks have the obligation to notify the Treasury of any movement equal to or greater than 3,000 euros. It is important to note that this notification does not automatically imply a sanction. In addition, financial institutions are obliged to report transactions that they consider suspicious, even if the amounts are lower.