For the purposes of inheritance and gift tax, the value of a property is deemed to be equal to its WOZ value. This statutory valuation presumption leads to an unusual outcome in the case of a gift. However, both the district court and the court of appeal considered this to be correct. On 26 February 2016, the Supreme Court upheld this ruling.
Case study
The case concerns a parent who is selling a property to a child and waiving €40,000 of the purchase price of €250,000, so that the child pays €210,000 in total.
The WOZ value of the property was €258,000.
Donation
The Tax and Customs Administration agrees that the purchase price of €250,000 is equal to the value of the property. However, under the valuation presumption in gift tax law, the WOZ value must be used as the basis for calculating the value of the gift. For the purposes of gift tax, the value of the gift is therefore not €40,000 (the amount waived), but €258,000 – €210,000 = €48,000 (the WOZ value minus the portion of the purchase price that has been paid).
Supreme Court
The Supreme Court rules that it is not the property, but the remission that must be valued. Furthermore, the valuation presumption for residential properties does not apply to the valuation of a debt waiver. According to the Supreme Court, the link between the transfer of the property and the debt waiver does not mean that the valuation presumption for residential properties must be applied when valuing the debt waiver.
The link between the transfer and the remission may be important in order to prevent both gift tax and stamp duty being levied on the amount of the remission.
A key factor in the Supreme Court’s judgment appears to be that the case concerns a waiver of part of the purchase price. Had the property been sold for a purchase price of €210,000, the Supreme Court would probably have concluded that the WOZ value should be used to value the gift.