When are occasional gifts tax-free?

The tax exemption for usual occasional gifts in § 13 subsection 1 no. 14 ErbStG is not always easy to handle. The facts are quite simple: the usual occasion gifts remain tax-free. But what is customary and what is an occasion gift is largely a matter of disagreement. This article aims to shed some light on the ambiguities.

controllability of donations in partnerships

Expensive gifts are not only given by celebrities and are becoming more and more valuable overall. Especially in partnerships, “usual occasional gifts” are widespread.

According to § 1, subsection 1, no. 2 ErbStG, gifts between living persons are subject to gift tax. Any generous gift between the living is considered a donation between the living, insofar as the recipient is thereby enriched at the expense of the giver (Section 7, subsection 1 no. 1 ErbStG).

According to the case law of the Federal Fiscal Court (BFH ruling of 16 September 2020 – II R 24/18, BStBl. II 2021, 621), a displacement of assets, i.e. a reduction of assets on the side of the donor and an increase of the assets on the side of the In addition, the donation must be free. The donor must also be aware that he disposes free of charge.

Unnamed grants

Family law distinguishes between gratuitous benefits and donations. According to current jurisprudence, unnamed donations and donations differ only in the element of intent: a donation exists when the donation is made in the sense of genuine generosity and is not linked to the expectation that the partnership will continue, but is made per free disposition for the recipient. With an anonymous donation, on the other hand, the donor has the idea that the object will not ultimately be lost, but will benefit society and thus himself (BGH decision of 18 March 2020 – XII ZB 380/19, NJW 2020, 2024, section .41).

It must therefore be considered a real gift if a man gives his girlfriend a luxury handbag for her birthday. It may be different if a large family car is given as a gift, this suggests an unnamed donation as the donor also benefits from this as a member of the family.

BFH delivered judgment on 2 March 1994 (BFH judgment of 2 March 1994 – II R 59/92, BStBl. II 1994, 366 under II.2.; BFH judgment of 27 November 2013 – II R 25/ 12 , BFH 12, BFH. /NV 2014, 537, paragraph 11) decided that unnamed donations are not simply excluded from the definition of a gift. The condition is that the donation is objectively free. This is also the case with untitled services, because there is neither a legal claim to such services, nor are they synallagmatically, contingently or causally connected with a consideration compensating for the acquisition.

As a result, both real donations and unnamed donations are taxable.

Tax exemption for occasional gifts

According to § 13, subsection 1, no. 14 ErbStG, the usual occasional gifts remain tax-free. The tax exemption for occasional gifts must be separated from the allowances according to § 16 ErbStG.

Section 16 of the ErbStG regulates the following allowances:

The purchase remains tax-free in the event of unlimited tax liability (§ 2, subsection 1, no. 1 ErbStG).

  1. the spouse and life partner for an amount of 500,000 euros;
  2. children in the sense of tax class I no. 2 and children of deceased children in the sense of tax class I no. 2 for an amount of 400,000 euros;
  3. the children of children in the sense of tax class I No. 2 for an amount of 200,000 euros;
  4. the other persons in tax class I for an amount of 100,000 euros;
  5. persons in tax class II for an amount of 20,000 euros;
  6. the other persons in tax class III to an amount of 20,000 euros.

The tax classes in inheritance tax law are determined as follows in accordance with § 15 ErbStG

(1) According to the transferee’s personal relationship with the testator or donor, a distinction is made between the following three tax classes:

Tax class I:

  1. spouse and life partner,
  2. children and stepchildren,
  3. descendants of children and stepchildren mentioned in number 2,
  4. the parents and ancestors in case of acquisitions mortis causa;

Tax class II:

  1. the parents and ancestors, unless they belong to tax class I,
  2. siblings,
  3. first degree descendants of siblings,
  4. the step parents,
  5. in-laws,
  6. in-laws,
  7. the divorced spouse and civil partner in a dissolved partnership;

Tax class III:

all other buyers and grants for special purposes.

As these allowances are relatively high for close relatives, the tax exemption for occasional gifts primarily affects gifts to persons in tax class III, as the allowance here is only €20,000.00.

In addition to the allowances, there are also tax exemptions for household goods and other items, which are determined according to section 13, subsection 1, no. 1 f. ErbStG.

Usual casual gifts

Usual occasional gifts cannot be services for which there is no obvious reason and which, in terms of object and value, is outside of what can be expected for the respective occasion. Furthermore, the redistribution of assets must not reach such a level that one can already speak of an expected succession.

As usual with the gift

what is common In the 1920s, the Reichsfinanzhof developed the so-called “relative approach”. According to it, it depends on “what is customary to give on occasions of the type in question in the circles of those involved”.

An individual assessment is therefore necessary for the assessment of normality. The reason for the donation and the relationship between donor and recipient also play a role. It therefore depends on the following criteria:

  • the reason for the grant
  • the type of grant
  • relationship between giver and receiver
  • the value of the subsidy
  • donor efficiency.

the reason for the grant

The occasion must be an event that also refers to the person of the recipient.

Regularly recurring events such as Christmas, birthdays and name days can be considered occasions. Occasional gifts are also common for single events, such as weddings, silver weddings, high school graduations, graduations, christenings or confirmations.

form of subsidy

The usual nature of the services depends on the other assessment criteria. It concerns, for example, the reason for the donation, but also the relationship between donor and recipient and the donor’s ability to perform.

the value of the grant

The question of the usual value of the gift is always very difficult to answer. Although no general rules or value limits could be set, even with great wealth there is a limit derived from the general public opinion on the customary nature of gifts (judgment of 8 May 2001 – 9 K 4175/99, EFG 2001, 1154, att. Viskorf/Schuck/Wälzholz/Viskorf, 6th edition 2020, ErbStG § 13 marginal number 147; Ivens FS Kroppen, 279, 299; v. Oertzen/Blasweiler ZEV 2019, 516 for lege an upper limit (519 de); ferenda: Troll Festgabe for Felix on his 60th birthday, 529, 535 f). In the case of large gifts, it is therefore not possible to state unambiguously what is customary.

donor efficiency

There are also no rigid value limits for a certain ratio between the gift and the giver’s annual income or similar. The comparison of the value of the donation with the income and wealth of the donor is an important indicator in the context of the overall appreciation of the donation.

If donations exceed the usual limits, they are fully taxable.

Obligation to report the donation

Section 30 of the Inheritance Tax Act provides that any acquisition subject to inheritance tax (subsection 1) must be reported in writing to the tax office responsible for the administration of the inheritance tax within a period of 3 months after becoming aware of the accrual or occurrence of the inheritance tax . the obligation must be shown.

The question therefore arises how to proceed with occasion gifts. If you follow the wording of § 30 ErbStG, every small birthday gift had to be reported. It is clear to anyone that this cannot be conscious. It is generally recognized that the obligation to report does not apply if it is clearly and unambiguously proven that no tax has been withheld, for example because there has been an occasional gift (cf. BFH ruling of 10 October 1951 – IV 216/51 S, BStBl. III 1951, 209; BFH ruling of 4 December 1957 – II 123/57 U, BStBl. III 1958, 117; BFH ruling of 11 June 1958 – II 56/57 U, BStBl. III 3398, Kapp 3398; /Ebeling/ Eisele, from November 2021, ErbStG § 30 marginal number 7; v. Oertzen/Loose/Grootens, 2nd edition 2020, ErbStG § 30 marginal number 10; Lippross/Seibel/Lutter, as of: Jan. 2022, ErbStG § 30, subsection 5, Stoklassa/Feldner ErbStB 2014, 69 (72)).

When in doubt, caution is always one advertising to guess.

Your lawyer and special lawyer for inheritance law

Christian Kessler

(This information is not provided within the framework of a specific contractual relationship. The author assumes no responsibility for the timeliness, correctness, completeness or quality of the information provided. Liability claims against the author relating to material or immaterial damage caused by the use of the information offered or caused of using incorrect and incomplete information is generally excluded to the greatest extent possible.)

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