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Give away second hand car. What interests more, donation or sale?

Give away second hand car. What interests more, donation or sale?
I want to give a second hand car to a relative. What interests more, to do as a donation or as a sale?

The answer to this question is another that "depends".

When we are going to give away or donate a vehicle, who receives it, for tax purposes the grantee, has the obligation to pay a tax that is based on the net value of the gift, or what is the same, the real value reduced by the charges And legally deductible debts.

It is the Inheritance and Donation Tax (ISD), and we will have to pay it, have the value of the vehicle.

Although this is by law, in practice, when someone gives a vehicle to a relative, chooses to make a sale rather than a donation. In this way, the Tax on Patrimonial Transmissions (ITP) is liquidated, instead of the Inheritance and Donation Tax (ISD). On one hand it is usually cheaper, especially for low value vehicles. On the other hand, making ITP self-assessment is simpler and cheaper in case of the change of ownership process through a management.

The following graph shows the difference in the fee to be paid between the Inheritance and Donation Tax (ISD) and the Transfer Tax (ITP) when transmitting a second hand car, based on the actual value of the car.

General Tax of Inheritance and Donations and Tax of Patrimonial Transmissions for a used car.
General Tax of Inheritance and Donations and Tax of Patrimonial Transmissions for a used car.
 In the amounts payable from the Transfer Tax (ITP) we have had a tax rate of 4% on the real value of the car. This percentage is applied in most autonomous communities, including the community of Madrid. However, in some autonomies the tax rate is higher. A good example of this would be Galicia with a current rate of 8%. While it is fair to say that in this community vehicles with more than 15 years and low capacity pay a small fixed fee.
Some communities, however, for vehicles that meet certain requirements, charge less or even exempt from ITP payment. In Catalonia, for example, the purchase of used cars with 10 or more years of age and less than € 40,000 is not taxed by ITP.
The amounts payable for Inheritance Tax and Donations have been obtained by applying the tax rates of the tables published for this purpose by the Ministry of Economy and Finance. It is important to bear in mind that each autonomous community can modify the sections and types that appear in these tables, since the Tax on Inheritance and Donations and the Tax on Patrimonial Transmissions were ceded by the State to the autonomous communities.

We have also considered that the donation of the vehicle is carried out between members with kinship relationships framed in group I (descendants and adoptees under the age of twenty-one) or group II (descendents and adoptees of twenty-one or more years, spouse, ascendants and Adopters), and that the pre-existing estate of the grantee is less than € 403,000. In addition, the grantee would not have received other donations from the same donor in the 3 years prior to the date the vehicle is donated.

If the relation of kinship was framed in another group (brother, uncle, nephew, cousin brother, stepfather, ...) the amount to pay would have to be multiplied by 1.5882. In the case of relatives more distant or of friends or third parties without relation of kinship, the amount to pay would be the double.

In some communities, such as Catalonia, if the kinship relationship between donor and grantee is within group I or II, and the actual value of the car does not exceed 200,000 €, the ISD tax rate is equal to that of the ITP (5 %), As long as we make the donation through public deed. In any other case, the type of levy to be submitted by the ISD would be higher.

In the Community of Madrid, the ISD is subsidized, for the group relationships of group I and II. Specifically, if the actual value of the car is more than € 3,850, it would be more interesting to donate than the sale. Even though we have to go through the notary to formalize the donation in a deed.

As we see in the following chart, in the Community of Madrid, from the mentioned value and as this value increases, the fee to be paid by ISD is progressively lower than that of ITP. For example, in the Community of Madrid, for a car with a real value of € 18,000, to settle the ISD instead of ITP would mean a saving of € 500.

Inheritance and Donation Tax and Transfer Tax of a second-hand car in the Community of Madrid
Inheritance and Donation Tax and Transfer Tax of a second-hand car in the Community of Madrid
 Although the amount payable by ISD in the Community of Madrid represents only 1% of the actual value of the car, since the tax rate is 99% subsidized, to benefit from this bonus we will have to formalize the donation in public deed , With the added cost. Something similar happens in Castilla la Mancha, where the bonus would be 95%, as long as the actual value of the car is less than € 120,000.
For the public deed of donation, the notary will charge us about 150 € for a car with a declared value of 6,000 €, and above this value € 4.5 plus per € 1,000 increase in the real value.

In any case, if we are going to donate or give a car, in order to calculate the fee to be paid, we will have to consult the types of tax, reductions, multiplier coefficients, and bonuses in force in our autonomous community for ISD.

The self-assessment form of the ISD is the model 651 and can be downloaded or completed online at the official website of the Ministry of Finance of each Autonomous Community.

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