Received gift tax assessment

• Gift tax assessment
• Taxable transactions
• Taxable acquisition as the basis of taxation (gift)
• Exemptions from tax in rem
• Personal allowances and tax brackets

The gift tax covers increases in wealth acquired without one's own action. The object of taxation is the gift among living persons. As a supplement to the inheritance tax, the gift tax is intended to contribute to a fairer distribution of wealth. This supplement is necessary to prevent circumvention of the inheritance tax on the future inheritance through gifts during one's lifetime.

An example of a gift among living persons is:

• every gratuitous benefit among living persons, insofar as the recipient is enriched by it at the expense of the benefactor
• the enrichment that a spouse or registered partner experiences upon the agreement of community of property
• what is granted as severance for a waiver of inheritance
• the transfer of assets on the basis of a foundation transaction inter vivos

The tax base for the tax is the taxable acquisition. The taxable acquisition is deemed to be the enrichment of the acquirer, insofar as it is not tax-exempt. The valuation of the assets and deductible liabilities is carried out in accordance with the Valuation Act.

Of particular importance is the valuation of real estate assets. Real estate values are determined, if necessary, in a separate procedure by the local tax offices. The valuation standard is the fair market value of the properties.

In addition, the tax bracket is decisive for the amount of tax, because the tax bracket affects the amount of your personal tax rate and allowance. As a general rule, the closer your relation to the donor, the more leniently the gift tax is applied.
 

The amount of tax further depends on whether material tax exemptions are to be taken into account. Of particular importance from the catalog of exemptions are the allowance for household goods in the amount of 41,000 euros for acquirers in tax class I, the allowance for other tangible movable property of 12,000 euros for acquirers in tax class I, and the allowance of 12,000 euros for household goods and other property combined for acquirers in tax classes II and III. The acquisition of a family home is also tax-exempt in many cases.

The law also provides for various tax relief options when acquiring eligible business and share assets as well as agricultural and forestry assets.

Gift tax arises at the time the transfer is executed. Both as the donor and the donee, you are generally required to report the acquisition in writing within a period of three months to the tax office responsible for administering the gift tax. The notification must include information on the identities of the parties involved, the legal basis of the acquisition, as well as its subject matter and value.

In addition, the tax office learns of tax-relevant acquisition processes through a large number of other notifications from third parties, e.g., through notifications from registry offices, banks, insurance companies, courts, and notaries. If a tax assessment is to be expected after evaluating these notifications, the tax office will request you to submit a gift tax return, which you generally must submit within one month; a comprehensive guide is attached to the return to help you fill it out.

The declaration must also be submitted if you are of the opinion that no gift tax is to be levied. The decision as to what is taxable and what is not taxable remains the prerogative of the tax office. If you subsequently realize that the tax return is incorrect or incomplete, you are obliged to report this immediately.

If you have gift tax to pay, you will receive a gift tax assessment notice from the tax office. The assessed tax is due within one month of the notification of the assessment.

This is a tax payment; additional costs generally only arise in the event of a breach of duty (e.g., late payment penalties, etc.)

The legal basis for the levying of the tax is the Inheritance and Gift Tax Act (ErbStG) in the version of the announcement of February 27, 1997 (Federal Law Gazette I 1997 p. 378), last amended by Article 12 of the Real Estate Tax Reform Act of November 26, 2019 (Federal Law Gazette I p. 1794).