Do I have to pay gift tax when transferring shares in a company?
August 19, 2023 | 50,00 EUR | answered by Lina Walter
Dear tax advisor,
My name is Christian Weinert and I have a question regarding gift tax in relation to the transfer of company shares. My parents are planning to transfer a portion of their company shares to me in order to involve me in the company in the long term. Now I am concerned whether I would have to pay gift tax in this case and how high it could be.
Currently, I do not own any company shares and therefore have no experience with tax-related questions in this area. I am also not familiar with the exact regulations regarding gift tax. That is why I am reaching out to you to gain clarity and avoid potential tax pitfalls.
My parents have successfully built up the business in recent years and now want to give me the opportunity to participate in it. Since I would like to continue running the business, it is important to me that the tax aspects of transferring the company shares are transparent and fair.
Could you please explain to me whether I would have to pay gift tax if company shares are transferred to me? What factors play a role in this and how high could the tax burden be in my case? Are there possible solutions to minimize or avoid gift tax?
Thank you in advance for your support and advice.
Sincerely,
Christian Weinert
Dear Mr. Weinert,
Thank you for your inquiry regarding gift tax in relation to the transfer of company shares. It is understandable that you are concerned about possible tax implications, especially when it comes to participating in a company. I am happy to provide you with an overview of the relevant regulations regarding gift tax in this context.
In general, gift tax is applicable when transferring company shares, if the value of the transferred shares exceeds a certain tax-free allowance. The value of the company shares is determined according to the general valuation rules set out in the Valuation Act. Various factors play a role in this, such as the company's value, earnings prospects, market conditions, and other economic aspects.
The amount of gift tax depends on the relationship between the donor and the recipient, as well as the value of the gift. In your case, if your parents are transferring company shares to you, it is considered a gift between parents and children. Here, more favorable tax-free allowances apply than for gifts to unrelated individuals. The tax-free allowance for children is currently 400,000 euros (as of 2021), meaning you can receive company shares tax-free up to this amount.
If the value of the gift exceeds the tax-free allowance, gift tax is due for the exceeding amount. The tax rates for gift tax are tiered and can vary depending on the amount of the gift. Therefore, it is important to accurately determine the value of the transferred company shares in order to correctly calculate the tax liability.
There are various tax planning options available to minimize or avoid gift tax. One of them is the use of tax-free allowances, for example through staggered gifts over several years. The transfer of shares as part of an anticipated inheritance can also bring tax advantages. However, it is important that these arrangements are made in a timely manner and in compliance with tax regulations to avoid potential tax risks.
In any case, I recommend consulting with a specialized tax advisor or inheritance law attorney to analyze your individual situation and find tailored solutions. I am happy to assist you with any further questions and support you in tax planning related to the transfer of company shares.
Best regards,
Lina Walter, Tax Advisor
