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You are liable to pay tax on a gift worth at least €5,000. You are also liable to pay tax if the same donor gives you several gifts in the course of 3 years and their total value exceeds €5,000.
If you receive such gifts, you must file a return to the Tax Administration. Gift recipients are responsible for filing a gift tax return and paying gift tax.
All kinds of assets and property given as a gift are subject to gift tax – not only money but also securities, fund units, shares in a housing company, real estate, cars, animals and valuables.
Your gifts are not subject to tax as long as the total value of gifts given to the same person in the course of 3 years does not exceed €5,000.
Example: Parents give money to their child. Each parent gives a cash gift of €4,999 on 1 January 2021. The next time either of them can give gifts worth €4,999 to the same child without gift tax liability is 1 January 2024.
If no gift tax is imposed, the gift recipient does not have to file a return unless so requested by the Tax Administration.
If you make a gift of household effects or donate for purposes of education, upbringing and maintenance of the gift recipient, your gift may be exempted from tax.
You must file a gift tax return and pay gift tax if you receive a gift worth €5,000 or more.
Instructions for filing and payment
The gifts you receive within a period of 3 years from the same donor are added up even if they represent different types of assets and property, such as cash and securities.
When you receive several gifts from the same donor in the course of 3 years, the value of a new gift is added to that of the previous gift(s). The basis for our assessment of gift tax is the total value of the gifts. However, if you have already paid gift tax on a previous gift, we will take that into consideration when assessing the new gift tax.
When the total value of the gifts is €5,000 or more, you must complete a gift tax return to inform the Tax Administration of all the gifts you have received in the course of 3 years, even if the value of an individual gift is below the taxable limit. You must file a gift tax return within three months of the date on which the total value of the gifts has reached the €5,000 limit.
Instructions for filing and payment
When you go over the €5,000 threshold because of a new gift you receive, you must file a gift tax return and list all the gifts received from the same donor in the past 3 years.
Example: Antti gave €4,000 in cash to his daughter Liisa on 3 January 2019. Later, on 1 May 2020, Antti gave Liisa another cash gift; this time, the sum was €2,000. The total value of the gifts is €6,000. As the €5,000 limit is reached, Liisa files a gift tax return on the gift she received on 1 May 2020 and she also fills in information on the earlier gift that she received on 3 January 2019.
She must pay gift tax on the total value (€6,000) according to tax bracket 1. The tax is €180.
The gift tax is calculated from the total value of the gifts received during a 3-year period. Consequently, if you have paid gift tax on a gift and the same donor gives you another gift later, the amount you have already paid will be taken into account.
Example: On 1 January 2019, Antti gave his daughter Liisa a gift worth €5,000, on which she paid €100 in gift tax under tax bracket 1. Next year, on 8 January 2021, Antti gave Liisa a new gift, the value of which was €20,000.
Because the gifts were given by the same donor within a period of 3 years, the amounts are added up (€5,000 + €20,000 = €25,000). Gift tax on a gift worth €25,000 is €1,300 in tax bracket 1 in 2021. From this amount, the €100 gift tax paid for the first gift will be deducted. The remaining amount for her to pay is thus €1,600 (€1,700 – €100).
The gifts you receive during a 3-year period from the same donor are added together, even if they represent different kinds of assets and property.
Example: On 1 January 2019, Antti gave his daughter Liisa a gift worth €75,000 – an apartment in a housing company – on which she paid €7,100 in gift tax under bracket 1. Later, on 1 May 2020, Antti gave Liisa another gift – a real estate unit – worth €200,000.
The gifts were received from the same donor within 3 years. For this reason, their values must be added up (€75,000 + €200,000 = €275,000). Gift tax on a gift worth €275,000 is €33,350 in tax bracket 1 in 2020. After deducting €7100, i.e. the tax Liisa paid earlier, the amount she still has to pay is €26,250.
Gifts between spouses are subject to the same tax treatment as other gifts. If the total value of the gifts received in the course of 3 years is €5,000 or more, you must pay gift tax. Although the donor and recipient are married to each other, they cannot transfer property free of tax.
Making a deposit into the couple's shared bank account does not transfer the ownership to the other spouse. It is therefore not regarded as a gift.
What would give rise to gift tax is a situation where money in the shared account is spent for the benefit of one spouse based on a reason other than to provide maintenance. For example, if one of the spouses withdraws cash from the shared bank account and uses it to buy assets for personal use, this spending would be subject to gift tax.
In other words, it is allowed for both spouses to transfer money into a shared bank account on the condition that the money will actually be used for the benefit of both spouses.
The house or apartment that you buy together as a couple must be owned by the two of you in proportion to the share each of you has paid.
If the ownership is registered as shared (each spouse owns half of the apartment) but, in reality, only one of the spouses spends money when the home is bought and later pays back the entire home loan, the ownership share of the other spouse is treated as a taxable gift.
When you borrow money, it may be treated as a gift if the circumstances give reason to believe that you never were expected to pay back the loan.
The lender is not required to collect interest. This means that the mere fact that no interest is paid does not turn a loan into a gift. However, there must be a plan for how the loan is to be repaid, and you must be able to prove that you actually made some repayments to the lender. The loan amount and the repayment plan must be realistic, i.e. in correct proportion to your financial standing. A loan can be treated as a gift if the lender and the borrower agree that the latter will receive tax-exempt gifts in order to repay the loan with them (for example, receive gifts of just below €5,000 with 3-year intervals).
Children under 18 are normally considered to be unable to pay back loans. If a child has no income that would cover the repayments, a gift from parents is regardes as a gift subject to gift tax.
If you receive an insurance indemnity without consideration based on a beneficiary clause, it is treated as a gift. However, if the insurance indemnity or part of the indemnity is subject to income tax, the taxable portion is not regarded as a gift.
You do not have to pay gift tax on indemnities paid on account of the policy holder's death on the basis of either life insurance or a voluntary pension insurance contract signed by the deceased person. Such indemnities are taken into account when inheritance and income tax are assessed.