Do donations to foreign countries need to be taxed?
January 7, 2023 | 60,00 EUR | answered by Lina Walter
Dear tax advisor for gift tax,
My name is Louis Dornbusch and I have a question regarding the taxation of gifts to foreign countries. My grandfather lives in Switzerland and wants to give me a large sum of money. Now I am wondering if this gift must also be taxed in Germany.
The background is that I live and work in Germany and therefore pay my taxes here. My grandfather, on the other hand, is liable for tax in Switzerland. We have good relations with both countries and would like to regulate everything correctly and transparently.
My concern is that I may have to declare the gift in Germany and therefore possibly have to pay high taxes. At the same time, I also want to ensure that no tax problems arise, both in Germany and in Switzerland.
Can you please explain to me whether gifts to foreign countries must be taxed and what options are available to find a fair and legal solution? I would like to handle everything correctly and legally to avoid possible conflicts with the tax authorities.
Thank you in advance for your help and advice.
Sincerely,
Louis Dornbusch
Dear Mr. Dornbusch,
Thank you for your inquiry regarding the taxation of gifts to foreign countries. It is understandable that you are concerned about possible tax consequences, especially when it comes to a significant amount of money. I would like to provide you with all the relevant information regarding gift tax in this context.
In general, gifts made by a person residing in Germany to another person are subject to gift tax in Germany. This applies regardless of whether the donor lives in Germany or abroad. In your case, since you live in Germany and your grandfather is resident in Switzerland, you must declare the gift in Germany and, if necessary, pay tax on it.
The amount of gift tax depends on various factors, such as the relationship between the donor and the recipient, the value of the gift, and the tax-free allowances applicable in Germany. Different tax-free allowances apply in Germany depending on the relationship, with direct relatives (such as grandchildren) having higher allowances than more distant relatives or non-relatives.
In your case as a grandchild, this could mean that you have a tax-free allowance of 200,000 euros for gifts from grandparents. Anything above this amount will be subject to gift tax. It may therefore be advisable to verify the exact amount of the gift and seek tax advice to minimize the tax burden.
As for the tax consequences in Switzerland, your grandfather as a Swiss taxpayer may also have to pay gift tax in Switzerland. It is important that both you and your grandfather comply with the tax regulations in both countries and consult with tax advisors in Germany and Switzerland, if necessary, to ensure that everything is handled correctly.
In terms of fair and legal solutions, you may consider a gift subject to usufruct reservation to reduce the tax burden. In this case, the donor retains the right to use and receive income from the gift, which can reduce the value of the gift for gift tax purposes.
I hope this information is helpful to you and provides you with an initial insight into the topic of gift tax. For individual advice and a precise calculation of the tax burden, I strongly recommend consulting a tax advisor to avoid any potential tax issues.
If you have any further questions or need additional information, please do not hesitate to contact me. Thank you for reaching out to me, and I wish you success in handling the gift.
Best regards,
Lina Walter
