Can I also give money as a gift tax-free in foreign countries?
September 13, 2023 | 40,00 EUR | answered by Bernd Schreiber
Dear tax advisor,
My name is Hanna Schottmann and I have a question regarding gift tax. I am planning to gift my son a large sum of money that I have invested in an account abroad. Now I am wondering if I can gift this money tax-free abroad or if gift tax in Germany will also be applicable.
My situation is as follows: I have the money invested in a foreign account as higher interest rates are offered there, allowing me to better grow my savings. Since my son is looking to buy a house, I would like to financially support him by gifting him a portion of the money.
My concerns are that I may have to unexpectedly pay high taxes if I gift the money from abroad. I want to ensure that the gift to my son is tax-free and that there are no unexpected costs for us.
Therefore, my question to you as a tax advisor is: Can I gift money abroad tax-free or do I have to pay gift tax in Germany? Are there possible solutions or ways to minimize the tax burden?
Thank you in advance for your help and support.
Sincerely,
Hanna Schottmann
Dear Mrs. Schottmann,
Thank you for your inquiry regarding gift tax in relation to a money gift to your son from abroad. It is understandable that you are concerned about possible tax implications and want to ensure that the gift remains tax-free for your son. I will therefore explain in detail how gift tax in Germany is treated in regards to money gifts from abroad.
In general, gift tax in Germany is levied on all gifts made from one person to another, regardless of whether the money is invested domestically or abroad. This means that money gifts from abroad may also be subject to gift tax. The amount of tax depends on the value of the gifted amount and the relationship between the donor and the recipient.
In your case, where you want to gift a larger sum of money to your son from abroad, this would be considered a gift and could therefore be subject to gift tax. It is important to note that gift tax in Germany is applied to the recipient's entire wealth, including foreign accounts and assets. Therefore, it is advisable to inform yourself in advance about the possible tax consequences of such a gift.
However, there are ways to minimize or even avoid the tax burden. One option, for example, would be to keep the gift amount below the tax exemption limit. In Germany, there is currently an exemption limit of 400,000 euros every 10 years for gifts between parents and children. If the gifted amount is below this exemption limit, no gift tax is due.
Another option would be to make a gift subject to a reserved life estate. In this case, you as the donor retain certain usage rights to the gifted assets, making the gift tax advantageous.
It is advisable to seek advice from a tax advisor or lawyer in such a case to carefully examine the tax implications of the planned gift from abroad and potentially find tax-optimized solutions.
I hope this information has been helpful to you. If you have any further questions or would like individual advice, I am happy to assist.
Best regards,
Bernd Schreiber
