Gift-like sales

If you sell an asset to someone for a low price, it may be treated as a gift-like sale. If the price is lower than the asset's fair market value, the buyer may have to pay gift tax.

If you and your buyer agreed to set the selling price to 75% (¾) or less of the fair market value of the asset, the sale is regarded as a gift-like sale. Then the difference between fair market value and actual selling price is regarded as a gift subject to gift tax. A gift tax return must be filed to the Tax Administration.

Read more about the valuation of gifts

The price includes all payments and benefits going to the seller

Examples of the benefits or payments to be included in the total price (often referred to as the total consideration):

  • The selling price that the buyer pays the seller in cash
  • Any debts that the seller has that the buyer agrees to pay up
  • Benefits that the buyer agrees to give the seller later, including pension or accommodation
  • Exchanged assets or property going from the buyer to the seller (the fair market value of such assets is included in the total consideration)
  • Other payments the buyer agrees to make, such as heating bills and electric power in connection with accommodation.

Examples of what is not treated as being part of the total price:

  • A part of the sold asset or property that the seller keeps (such as a parcel of land not included in the property sale transaction)
  • In a housing company, an apartment's specific share of an unpaid housing-company loan that reduces the apartment's value
  • A right including possession, usufruct, live-in tenancy of the seller or a third party, provided that this right does not involve an action that the buyer must take (such as a requirement that the buyer must pay heating bills in connection with a live-in tenancy)
  • A right to cut wood, withheld by the seller, on a sold parcel of forest land.

Example: Antti sells his daughter Liisa an apartment for €130,000 but its fair market value is €200,000. Consequently, total consideration is 65% of fair market value (€130,000 / €200,000). Liisa is treated as receiving a gift worth €70,000 (the fair market value €200,000 minus the paid consideration €130,000).  Gift tax under the first bracket on a gift worth €70,000 in 2017 equals €6,500.  If the selling price were €150,000 or higher (going over the 75-percent threshold), Liisa would pay no gift tax.


Example: Antti gives his daughter Liisa a unit of real estate with a fair market value of €150,000. When Antti bought the real estate, he borrowed money from the bank. The loan balance stands at €50,000 on the date when Antti gives it away to Liisa. Liisa agrees to pay off the rest of the loan, which the bank now registered as a loan to Liisa. Because the loan is transferred to Liisa in connection with the donation, there is a payment of consideration from Liisa to Antti amounting to €50,000. This way, the value of the real estate for gift tax purposes is €100,000 (€150,000 – €50,000). Gift tax under the first bracket on a gift worth €100,000 in 2017 equals €10,100.

Difference less than €5,000 between fair market value and payment

If the amount treated as a gift i.e. the difference between the asset's fair market value and the recipient's payment of consideration stays below €5,000, there is no need to pay gift tax even if the selling price were not above the 75-percent threshold. However, if the same donor has given you gifts during a three-year period and total value is €5,000 (€4,000 before 1.1.2017) or more, you must pay gift tax.

Example: Antti sells his daughter Liisa a holding of Firma Oy's corporate stock for €7,000. The fair market value of the stocks is €10,000.  The consideration equals 70% of fair market value, so the transaction is a gift-like sale. The difference between fair market value and payment is €3,000. This is the part regarded as the gift. Liisa has not received other gifts from her father Antti during the three years preceding the transaction. Because the gift's value is less than €5,000, she does not have to pay gift tax.

More information on the three-year rule in gift taxation

Housing-company loans reducing the apartment's value

When you determine the fair market value of an apartment, you must include any housing-company debt in your calculation. You simply deduct the unpaid loan balance at the date when the gift is made. The adjusted value of the apartment is then compared to the agreed selling price in order to assess whether a gift-like sale is in question.  However, it must be noted that any unpaid home-loan balances of the apartment's owner-shareholder don't have an effect on its fair market value.

Example: Antti sells his daughter Liisa an apartment for €150,000. The housing company has allotted a loan balance of €20,000 to the apartment. This unpaid balance is transferred to Liisa's name. Recently, a similar apartment in the same building was sold to a new owner for €210,000. Because of the existence of a comparable transaction, we can state that the apartment's fair market value is €210,000 excluding debt.  We deduct the housing-company loan in order to arrive at the adjusted fair market value €190,000. Because the agreed total consideration is more than 75% of fair market value (€150,000 / €190,000), the transaction between Antti and Liisa is not regarded as a gift-like sale that would be subject to gift tax.

The apartment's fair market value equals €210,000 in circumstances where no housing-company loan is allotted to it. Then the agreed consideration of €150,000 would be 71% of fair market value (€150,000 / €210,000), which would make Liisa a recipient of a 60,000-euro gift from her father. Gift tax under the first bracket on a gift worth €60,000 in 2017 equals €5,300.

Selling price staying unpaid

If the buyer doesn't pay up the agreed consideration immediately and remains in debt, and the seller later agrees to forgo the unpaid balance, the transaction is treated as a gift. If the circumstances at hand make it seem likely that the buyer is deliberately not going to settle the price, the transaction may be treated as a gift already when it is made.  When the authorities determine whether a gift subject to gift tax is made, the payment terms and the financial circumstances of the buyer are taken into account. The buyer may not have enough income to be able to pay the agreed price at all.

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