In a new decision With regard to valuation in the context of gift and inheritance tax, the State Secretary for Finance has clarified how the gift of a property should be valued.
WOZ value
For residential properties, the WOZ value set by the local authority is used for the purposes of gift and inheritance tax. For the purposes of gift and inheritance tax, residential properties are defined as all immovable property used as a dwelling.
However, to determine whether a gift has been made, one must consider the market value (WEV). In the current housing market, the market value is in many cases (significantly) higher than the WOZ value. On the one hand, this is because the WOZ value is based on a reference date from a year ago (the 2021 WOZ value is based on the reference date of 1 January 2020). And on the other hand, because house prices are rising.
Example 1
In the decision, the State Secretary gives the following example. The WOZ value of the property is €280,000; the WEV is €300,000. The property is sold to a family member for €290,000. As the purchase price is lower than the WEV, this constitutes a gift. For the purposes of gift tax, this gift must be valued using the WOZ value. As the purchase price is higher than the WOZ value, the value of the gift is nil and no gift tax is levied.
Example 2
The second example in the decision concerns the reverse situation: WEV €270,000, WOZ €280,000 and purchase price €200,000. In this case too, it constitutes a gift, as the purchase price is lower than the WEV. The value of the gift must be determined on the basis of the WOZ value. The amount subject to gift tax is: €280,000 – €200,000 = €80,000.
Remission
It must genuinely be a gift or donation of the property. The valuation rule does not apply in the case of a waiver of the outstanding purchase price for a property, unless 90% or more of the purchase price has been waived by the date of execution of the notarial deed of transfer at the latest. This 90% threshold has been set by the State Secretary as a safe harbour. It cannot be ruled out that the tax court might also consider a lower percentage to be sufficient.