Gift from EU foreign countries
December 18, 2011 | 35,00 EUR | answered by Oliver Burchardt
Dear Sir or Madam,
My aunt from Greece intended to transfer 20,000 euros each to my brother, my father, and me to our German bank accounts. In August 2011, I received a gift of 20,000 euros from my aunt on my German bank account. Unfortunately, I did not report this to the tax office due to ignorance of the legal situation (§ 30 para. 1 ErbStG). In December 2011, my aunt transferred another amount of 30,000 euros to my bank account and 10,000 euros to my father's bank account (who is my aunt's brother). I am aware that both my father and I fall into tax class II according to the law (§ 15 para. 1 ErbStG) and therefore have a tax-free allowance of 20,000 euros each. I have clearly exceeded this allowance.
If I were to transfer 10,000 euros of the gifted money to my father and 20,000 euros to my brother, each of us would have received the intended gift of 20,000 euros from my aunt, and none of us would have exceeded their tax-free allowance. I would like to know:
- Do I have to provide written proof to the tax office that my aunt intended to transfer 20,000 euros to each of us, or will the tax office object because I received the majority of the gift amount (50,000 euros) individually?
- Or should I return the entire amount and instruct my aunt to transfer 20,000 euros to each of the three bank accounts (mine, my brother's, my father's)?
- Does a cash gift need to be reported to the tax office in general if the tax-free allowance of 20,000 euros is not exceeded?
Thank you very much.
Dear inquirer,
Thank you for your inquiry, which I am happy to answer as part of an initial consultation.
Please note that the tax assessment is based on the information provided. Adding, changing, or omitting information can alter the result, possibly significantly.
In your case, you must prove through suitable documents that your aunt did not intend to gift you 30,000 EUR despite transferring it to your bank account. The presumption of intention suggests that your aunt intended to gift you the money (after all, she already transferred 10,000 EUR to your father's account in August). Unfortunately, you should be prepared for the tax office to question the documentation, unless there are notarized documents that clearly prove your aunt's intention to gift.
However, this is likely not the case here. Therefore, it is expected that the tax office will consider the transfer to you as a gift and subject it to gift tax. At the same time, gifting amounts to your father and brother would also trigger gift tax for further gifts.
One way out could be to return the money to your aunt and then make a new transfer to document the specific gifting intention for the 30,000 EUR. You are generally required to report all gifts (even those below the tax-free allowance). Therefore, you must report the gift made in August 2011. Regarding the transfer made in December 2011, it can be argued that no gift has been made yet if the funds are promptly returned. Thus, there would be no reporting obligation under § 30 of the Inheritance and Gift Tax Act. This reporting obligation would only be triggered upon the subsequent transfer of funds.
However, legal reporting obligations may have been triggered under the Anti-Money Laundering Act, or your bank may have sent control notifications to your tax office after an audit. In this case, be prepared for inquiries.
I apologize for not being able to provide a conclusive answer here, but since the situation is already partially realized, there are limited possibilities for tax planning.
I hope my explanations have been helpful to you.
Kind regards,
Oliver Burchardt
Certified Public Accountant
Tax Advisor
