Gifts can offer tax advantages in relation to inheritance and gift tax. After all, gifts can be regarded as an advance on an inheritance.
180 days
To prevent benefits being gained from gifts at the very last moment, the 180-day rule applies. Any gifts made within 180 days of the testator’s death are deemed to have been acquired under the law of succession. To the extent that gift tax has been paid, it may be set off against inheritance tax.
The 180-day rule does not apply to gifts that have been received tax-free:
- of the King (or his presumed successor);
- by a person of limited means or no means (see our article Other exemptions from gift tax);
- by a legal entity whose purpose is to represent the interests of the employees in the donor’s business;
- in fulfilment of a natural obligation;
- taking into account the one-off increased tax allowances for children;
- subject to the exemption for gifts relating to the owner’s own home.
Partial donation
A case was recently heard at the Zeeland-West-Brabant District Court case Regarding the 180-day rule. The father makes a gift to the children from his private limited company. The mother dies within 180 days of this gift. The children argue that, as the gift comes from their father, it need not be treated as a notional acquisition for the purposes of inheritance tax.
However, the Court has ruled that the gift originated from the community of property to which the father and mother were subject as married couple. Consequently, half of the gift is attributable to the mother. For the purposes of inheritance tax, that half qualifies as a notional acquisition.
The gift was transferred to the children from their father’s private limited company. The shares in that company form part of the community of property. There is no private capital involved. The community of property is therefore diminished as a result of the gift. As the father is acting out of generosity, the mother is also deemed to have intended to favour the children. When calculating the inheritance tax on their mother’s estate, the children must take into account half of the gift received from their father.