When do I need to pay gift tax?

As a donor, you can give a person a tax-exempt gift, worth less than €5,000, every 3 years.

The above threshold concerns the donor. This means that one donor can make more than one tax-exempt gifts as long as the threshold is not exceeded, or as long as the recipient is another person.

On the other hand, the gift recipient can receive gifts from several donors, i.e. from different givers of gifts. In this case, the gifts can be tax-exempt. For determining whether gift tax must be paid, the important matter is that over the course of 3 years, the gifts you get from one giver stay below €5,000 in value.

Example: On 5 September 2024, Pekka’s and Mirja’s mother and father donate €4,999 each to both of their children.

In other words, Pekka received €4,999 from his mother and another €4,999 from his father – receiving €9,998 in total.

Also receiving €9,998 in total, Mirja received €4,999 from her mother and another €4,999 from her father.

Next time when Pekka’s and Mirja’s mother is able to make a similar tax-exempt gift of €4,999 to both children will be 5 September 2027. This also concerns Pekka’s and Mirja’s father — next time he can give €4,999 to both children will be 5 September 2027.

Example: The child’s godmother donates €1,000 to the child on 15 February 2024. However, she donated €1,500 to the child already on 24 December 2022. For purposes of gift tax, as the total within three years stays below €5,000, her gift is exempted from gift tax.

Because no gift tax is imposed in this case, the gift recipient does not have to file a return unless so requested by the Tax Administration. However, sometimes it is advisable that you should also submit a gift tax return when you receive a gift of smaller value. If you were to sell the asset later, you could then use the confirmed gift tax value of the asset as the acquisition cost.

Moreover, if you make a gift of household effects or donate money for purposes of education, upbringing and maintenance of the gift recipient, your gift may be exempted from tax. Read more about gifts of household effects and gifts for upbringing and education.

If you give a gift to your natural heir – to your child or grandchild, etc. – the tax authorities usually consider such a gift as an advancement given to an heir before the parent’s death. 

This way, advancements are gifts, which makes it necessary for the recipient to pay gift tax. If a gift has been defined as an advancement, it will be accounted for when the distribution of the estate is carried out and this also means that it affects the assessment of inheritance tax.

However, gifts are usually not considered advancements in the following circumstances:

• All natural heirs receive gifts of the same value.
• There is only one natural heir, and he or she receives a gift.
• The donor has set a specific condition, which may have been recorded in writing in the deed of gift, that the gift is not to be deemed as an advancement.

However, if the gift had not been designated as an advancement, the gift will be accounted for in the assessment of inheritance taxes if the gift was received maximally 3 years prior to the donor’s date of death.

Read more about how advancements are included in inheritance taxes.

Please note: If you sell property to a natural heir for a low price, as a gift-like sale, it may later be treated as a gift, and valuated again during the distribution of the estate that you leave behind. However, if the selling price is the same as the property’s fair market value, the sale cannot be deemed as an advancement.

Gifts between spouses are subject to the same tax treatment as other gifts. If the combined 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.

The house or apartment that you buy together as a couple must be owned by the two of you in proportions that reflect the amounts of money that each of you has paid.

If the ownership is registered as 50-50 but in reality, only one of the spouses spends money when the home is bought, and later pays back the entire home loan, the 50% ownership registered to the other spouse is treated as a taxable gift.

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 gift-giving.

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 liability to provide maintenance. Such spending takes place, for example, if one of the spouses withdraws cash from the shared bank account and uses it to buy assets for personal use.

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.

Yes, you can. However, if you do so, you must take account of the fact that also the tax is a gift, so gift tax must be paid on it.

Accordingly, if you give an apartment to someone as a gift − or if you give some other property − and you want to make it so that the recipient of your gift will not have to pay gift tax, there’s nothing to prevent you from donating the necessary sum of money to cover the gift tax, too. The base for gift taxes is the total gift value — the amount that includes the apartment and the cash gift you give in order to pay for the gift tax.

Another important point is that the base also includes all the other gifts you may have given during the past 3 years. If gift tax was paid on those already, the Tax Administration will take it into account: you will only have to pay the part that your previous gift-tax payments do not cover.

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 it back.

Lenders are not required to collect interest on a loan. 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 the borrower’s financial standing. For purposes of gift taxation, a loan may be deemed 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 regarded as a gift subject to gift tax.

If you receive alcohol or tobacco as gifts from within the EU, the amount and category of the products determine whether or not you must pay excise duty on them. Read more on excise duty.

If you make payments for a home loan that belongs to another person, the sums of money you pay are considered a gift to the other person. These payments are therefore subject to the same rules as any other gift. If the sum of these payments amounts to €5,000 or more over a three-year period, the person with the home loan must file a gift tax return and pay gift tax on the loan payments you have made on their behalf.

Instructions for filing and paying gift tax