Taxation on gifts from family

108 posts in this topic

10 hours ago, fraufruit said:

What do you think happens when one stops paying their mortgage?

I don't know anyone that this has happened to. :rolleyes: 

Do you know of a situation like the one the OP is describing

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1 hour ago, lunaCH said:

I don't know anyone that this has happened to. :rolleyes: 

 

Life in Lalaland must be fun.

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On 24/08/2020, 14:18:58, NathanCPFCD said:

Now I’m wondering whether it is even possible to put someone on the land registry who isn’t on the mortgage.

The opposite is apparently possible, you can be on a mortgage but not on land registry for that property. Let us know what you find out.

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Thanks everyone for your help on this! The input was super useful and everything is now resolved.

 

My girlfriend received the sum from her parents, which is well below the taxable limit. She has now transferred that to me for use as part of the real estate purchase that will be finalized in the next few weeks. The Finanzamt will have no problem with the transfer from her to me because she will be on the land registry and purchase contract so it is clear that her transfer to me was not a gift. The banks we have submitted our mortgage application have no issue with her being on the purchase contract and land registry without being on the mortgage. However, she will have to sign a declaration that states that if the mortgage goes unpaid, the bank will have the right to her percentage of the property. :D

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Also interesting point that I came across - married couples are now required to have joint ownership of properties, even if there is a sole signatory on the mortgage. Apparently there was a significant problem of husbands purchasing property without their wive's knowledge!

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1 hour ago, NathanCPFCD said:

Also interesting point that I came across - married couples are now required to have joint ownership of properties, even if there is a sole signatory on the mortgage. Apparently there was a significant problem of husbands purchasing property without their wive's knowledge!

Where? In Germany?

What's the source?

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This thread has so much info on that I feel a little overwhelmed, and would benefit from a quick check to see if I have understood right...

 

  1. so my father in the UK is giving me some money, he would put it into my UK bank account (unless they close it before, but that is another thread all together...) where I will pay income tax.  Then when I transfer it to Germany I declare it to the F-Amt as a gift and they deduct it from my 400K€ 10 year gift allowance. Have I got it right? 
  2. Does it make any difference if he transfers it directly to me in Germany, therefore never entering my UK bank account?
  3. and he wants to give some money to my children too, but they do not have their own accounts, so he wishes me to 'manage' it for them until they are older. Can it come to my account but be identified as for them? - they are all minors.
  4. and while we're at it.  I still have some savings in the UK from before I came to Germany.  This was taxed as income back when I earned/received it,  That means it is my money and is not a gift.  So presumably I can just transfer it from pounds to Euros without having to notify anyone... but how can anyone know which money was mine from before and which was given to me since?

Thanks for any ideas.

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6 hours ago, Laurieston said:

4.  and while we're at it.  I still have some savings in the UK from before I came to Germany.  This was taxed as income back when I earned/received it,  That means it is my money and is not a gift.  So presumably I can just transfer it from pounds to Euros without having to notify anyone... but how can anyone know which money was mine from before and which was given to me since?

 

Presumably you have declared any interest you might have received on those savings whilst you have been resident in Germany...

 

When transferring cash savings from UK to DE you don't have to inform anyone - not even the Bundesbank (as your German receiving bank might try to tell you).

(I did such a transfer some years ago &dutifully phoned the Bundesbank as instructed by my bank & they (Bundesbank) said cash => cash not interested).

Just retain the any evidence in case someone asks.

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27 minutes ago, HEM said:

(I did such a transfer some years ago &dutifully phoned the Bundesbank as instructed by my bank & they (Bundesbank) said cash => cash not interested).

That they weren't interested doesn't surprise me - I've never even heard of this. Think of all of the cash that can brought with you in person. None of that is ever declared anywhere. Sounds like bureaucracy gone mad if you ask me.

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I'll leave others to comment on the German rules but first I do not understand your point 1 and second you'll need to consider the UK Inheritance Tax (IHT) rules as well.

 

Why would you have to pay UK income tax on the amount your father gives you?  This is not your income for UK income tax purposes.  Any interest arising on that (and any other amounts in your UK bank accounts) would be subject to UK income tax (subject to the rules in the UK/German Double Tax Agreement) but not the receipt of the gift.  

 

The IHT position is important here and you should have a look at https://www.gov.uk/inheritance-tax/gifts. It seems the 7-year rule is one to take particular note of here.  Your father can give you as much as he wishes, say, 100k and there would be no IHT to pay if he survives the gift for 7 years.  If he dies within those 7 years, then in simple terms (ignoring the 3 to 7 year taper point) the value of the gift is added back into the value of his estate for calculating the amount of IHT due. You and he will need to keep documentation of the gift so that the executors of his will could complete the relevant IHT return correctly. 

 

It matters not for UK purposes whether your father pays the money to your UK or German account. It also makes no difference from an IHT perspective whether he gifts the money to you, your children or both, as it is the value of your fathers estate that is being reduced and IHT is a charge on that value when the time comes. 

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Thank you GaryC for your clear explanation of IHT from the UK side of things.

 

However, there is also the issue of 'gift tax' here in Germany which is not dependant on how long he lives.  His gift to me, which incidently he wishes to be split (unequally) between myself and my children (his grandchildren) has to be reported to the Finance Amt, but most of my children are still minors and do not have their own bank accounts.  Can the total sum be transfered into my account, but parts of it somehow recorded as 'belonging' to my children?

 

This gift would probably be tranferred into my UK bank account rather than arriving in Germany.  On this forum I have read suggested language to describe a gift, for example "Geschenk von Oma Peter an mein Enkel Thomas" which would appear in the bank statement, thus providing a clear and simple reference for the Finance Amt.  Do you think that if something similar appeared in my English bank statement (in English naturally) this would satisfy the Finance Amt?  I suppose it could be written in German...

 

And a last question; any recommendations on a Tax Advisor who is knowledgable on UK and German taxes who I could work with?  Apart from Thomas Zitzelsberger (who I am informed is not taking on new clients at the moment.)

 

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10 hours ago, Laurieston said:

However, there is also the issue of 'gift tax' here in Germany which is not dependant on how long he lives.  His gift to me, which incidently he wishes to be split (unequally) between myself and my children (his grandchildren) has to be reported to the Finance Amt,

 

AFAIK you only have to report it if the threshold for gifts are exceeded (€ 400000/10 years for gifts from parents to their kids,  € 200000 to grandchildren). 

https://www.haufe.de/steuern/steuer-office-basic/schenkungsteuererklaerung-ab-dem-172016-2-anzeigepflicht_idesk_PI27_HI10899686.html

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12 hours ago, Laurieston said:

Thank you GaryC for your clear explanation of IHT from the UK side of things.

 

However, there is also the issue of 'gift tax' here in Germany which is not dependant on how long he lives.  His gift to me, which incidently he wishes to be split (unequally) between myself and my children (his grandchildren) has to be reported to the Finance Amt, but most of my children are still minors and do not have their own bank accounts.  Can the total sum be transfered into my account, but parts of it somehow recorded as 'belonging' to my children?

 

This gift would probably be tranferred into my UK bank account rather than arriving in Germany.  On this forum I have read suggested language to describe a gift, for example "Geschenk von Oma Peter an mein Enkel Thomas" which would appear in the bank statement, thus providing a clear and simple reference for the Finance Amt.  Do you think that if something similar appeared in my English bank statement (in English naturally) this would satisfy the Finance Amt?  I suppose it could be written in German...

 

And a last question; any recommendations on a Tax Advisor who is knowledgable on UK and German taxes who I could work with?  Apart from Thomas Zitzelsberger (who I am informed is not taking on new clients at the moment.)

 

I am aware of the fact that your question was aimed at the German end of things but didn't want your father to forget the UK side.

 

AFAIK it shouldn't matter to where the money is transferred - certainly not for the UK end and I doubt it matters either for the German end.  In terms of an advisor, you could contact @PandaMunich via the link in her profile on here.

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Thank you GaryC, I have pm'd Panda.

 

 

 

So, we're making good progress. The next step is as follows:

 

A difficult relationship with an uncle results in him leaving most of his money to my siblings, and little to me (long story and not relevant to a finance discussion...) which my siblings (luckily for me) find unfair.  They would like to give me a share of the money they receive from him.  This means that I would be gifted sums of money from several people, all about the same time, all with the same surname (but from different bank accounts). From the little I know this seems to be totally legal and above board, but I keep reading that the German financeamt are very strict and suspicious (my word), and do not want to get into trouble.  Any thoughts?

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One for the German tax folk on here, or your discussions with your advisor but from the UK perspective, each of those relatives is making a lifetime gift for IHT purposes, so the rules I linked to above will apply to each of them.  If they receive non-cash assets from the deceased's estate, then on either selling them to realise cash for you or on transferring the asset to you they will also need to consider Capital Gains Tax. 

 

It is also possible that you may get an enquiry from HMRC if the sums are large enough but that would just be to check that all is above board, so as long as everything is documented between you and the relatives that wouldn't be a problem.  The UK tax system operates on a self-assessment basis, i.e. you have to self assess how much tax is due and then pay it by the due dates.  Key to this is your duty to notify HMRC of new sources of income or capital gains. HMRC then sends you notice to submit a self-assessment tax return (assuming you don't already complete one).  You must comply with the notice to file a return and HMRC then have a window of, generally, 12 months from the date of receipt of your return to open an enquiry aka a compliance check.  If they think you may have failed to notify a new source, they can enquire accordingly...

 

 

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13 hours ago, Laurieston said:

Thank you GaryC, I have pm'd Panda.

 

 

 

So, we're making good progress. The next step is as follows:

 

A difficult relationship with an uncle results in him leaving most of his money to my siblings, and little to me (long story and not relevant to a finance discussion...) which my siblings (luckily for me) find unfair.  They would like to give me a share of the money they receive from him.  This means that I would be gifted sums of money from several people, all about the same time, all with the same surname (but from different bank accounts). From the little I know this seems to be totally legal and above board, but I keep reading that the German financeamt are very strict and suspicious (my word), and do not want to get into trouble.  Any thoughts?

The threshold for gifts from siblings is € 20000 / 10 years / sibling. source: https://www.steuertipps.de/steuererklaerung-finanzamt/themen/freibetraege-bei-der-erbschaftssteuer-und-schenkungssteuer

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So much information, which is great. 

 

My parents' in law want to give my children some money.  I know about the tax-free limits, etc., but am concerned because their surname is different from my children's surname (maternal grandparents) and so the suggested "Verwendungszweck" would look like this:

 

         "Geschenk von Oma Jane Laurieston an Enkelin Jessie Smith" 

 

Frrom my own father, the "Verwendungsweck" would look better,  "Geschenk von Opa John McDonald an Enkelin Jessis Smith" but does he also need to prove the relationship, or is this message enough.

 

Also, the grandparents' suggestion is to transfer it through an OFX company which they sometimes use, but this means it would be transferred from their private (individual) accounts into an OFX company account which would then transfer it on into a German account in solely my child's name.  It would then not be so clear exactly where it came from, although they could arrange for the suggested "'Geschenk von...to..." message to appear in the transfer into Germany.  Would that satisfy?

 

Thanks in advance.

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