What is a gift tax? In the nutshell, it is a transfer tax imposed on the gratuitous transfer of money or property from one individual or entity to another. To be considered a gift, the transfer must be made without full compensation or at a value less than its market worth.
Estate planning frequently uses gift-giving to manage the transfer of wealth during life or upon death of a person. For a transfer to qualify as a gift, the recipient must not fully compensate the donor. Valid gifts require the donor’s intent to transfer ownership, the recipient’s ability to accept the gift, and the donor’s relinquishment of control over the property.
Globally, approaches to gift tax vary. Countries with no gift tax include Argentina, Australia, Austria, Canada, Cyprus, Liechtenstein, New Zealand, Norway, Slovakia, and Sweden.
In general, however, the majority of countries impose gift taxes with tax rates from 4% in Croatia or 5% in Thailand to 50% in Germany or even 60% in France. Alternatively, gifts are subject to ordinary income taxation in countries such as Czech Republic, Mexico or India. Exemptions may apply for gifts between spouses, immediate family members or gifts payments for various charitable purposes (e.g. educational, medical).
Our view: We praise the abovementioned countries with no gift tax as we see no rationale behind taxation of gifts in any form whatsoever. How to justify the tax on transfer of your private property who you give freely to another person? We argue that there is no reasonable justification for it and for any interference by the state. Such tax is a daylight robbery in our view.
Please do remember that effective tax planning and professional consultation are crucial for mitigation of any tax, not just gift tax. This is area of our expertise where we can be helpful.
Are you looking for more information about gift taxation and/or need guidance how to correctly make a gift without tax implications in your respective country? With over 20 years of international experience, we offer you our tailored services to meet your specific needs. Contact us via phone (+44 20 3974 1244) or via email at office@bensonformations.com.
