When a person or a company transfers or gives assets to another without consideration, the recipient is obliged to pay gift tax. There is no obligation to pay gift tax if the value of the gift is less than € 5,000. However, all gifts received from one donor during a 3-year period are combined when considering the € 5,000 threshold.
The recipient is obliged to file a gift tax return within three months from receiving the gift. The Tax Administration may impose a late-filing penalty or a punitive tax increase if filing the gift tax return has been neglected or there has been filed an incorrect gift tax return.
In the event of a person’s decease, her/his heirs and legatees need to pay inheritance tax on the inheritance or bequest that is imposed based on the deed of inventory. The deed of inventory needs to be prepared within three months from the death and filed with the Tax Administration within one month of the estate inventory meeting.
The amount of gift and inheritance tax is calculated on a progressive tax scale. The recipients are divided into two tax categories (I and II) so that the lower tax scale, category I, is applied to the closest relatives like spouse and the descendants. In the first category the maximum gift tax rate is 17 percent, and the maximum inheritance tax rate is 19 percent. In the second category the maximum tax rate is 33 % for both gift and inheritance tax.
tax planning in gift and inheritance taxation is possible
Gift and inheritance taxation can be planned both internationally and nationally in various ways. In entrepreneurial families the key tax planning tool is the succession. This is just one example out of many on how taxes can be optimized.
In inheritance taxation the key tax planning tool is taking taxes into account when drafting a testament. For example, the decedent’s spouse or registered partner have the possibility to deduct EUR 90,000 of their inheritance portion before imposing taxes (deduction for spouses). The decedent’s minor children, in turn, have the possibility to deduct EUR 60,000 of their inheritance portion before any tax is levied (deduction for minors).
In gift taxation the main tax planning tool is using gift-like sales where an asset is sold to someone for a price below its fair market value. For example, no tax is imposed if the price paid exceeds 75 percent of the fair market value. Thus, the valuation of stocks is an inherent part of gift tax planning. It should be noted that the gift tax relief for a generational transfer (i.e. succession) applies also in gift-like sales.
International taxation also offers tax planning opportunities in the field of gift and inheritance taxation.
Long-term Gift and inheritance TAX planning is Recommendable gift tax planning and inheritance tax planning is recommended to take place long-term
It is advisable for entrepreneurs and wealthy individuals to start planning asset transfers to the next generation at the earliest possible stage. According to our experience, long-term gift and inheritance tax planning helps avoiding multiple taxation and enables transferring assets efficiently as desired.
Gift or inheritance tax questions? – fiscales helps you with all questions
Fiscales provides assistance in any gift or inheritance tax matters. Our services include drafting deeds, wills, and prenuptial agreements as well as filing tax returns and tax planning in general.
It is possible to appeal against a gift or inheritance tax decision after the assessment process has been completed. We are pleased to be of assistance in any tax appeals or any other tax related processes our clients may have.