With effect from 2017, anyone aged between 18 and 40 may receive a tax-free gift of up to €100,000 (this gift tax exemption is now also known as the jubelton). The condition is that the amount gifted must be spent on the beneficiary’s own home. In a amendment to the Gift and Inheritance Tax Regulations The State Secretary for Finance has included a number of further conditions.
Unconditional gifting
The gift must be unconditional. This means that there must be no uncertainty regarding the gift. Furthermore, it must not be possible to revoke the gift retrospectively by making it revocable.
The only exception is a gift made subject to the condition subsequent that the amount gifted has not been spent on the donor’s own home in accordance with the conditions. This condition subsequent must then be set out in writing.
Proof
If requested to do so by the Tax and Customs Administration, the beneficiary must provide written evidence that the amount received was used in good time for their own home. The requirement to “demonstrate” this represents a higher burden of proof compared with previous years. Previously, it was sufficient to “make a plausible case” for the correct use of the gift.
The gift must be spent by the end of the second calendar year following the calendar year in which it was received. It is also permitted to make additional tax-exempt gifts during the two calendar years following the calendar year in which the gift was received.
Example 1
In 2017, a child receives a gift of €100,000 for the renovation of their own home. This amount must then be spent in full on the renovation by 31 December 2019 at the latest. If this is not the case, the exemption will lapse for the portion of the gift that has not been used (in time). If the condition precedent described above is attached to the gift, the gift will lapse (possibly for the portion that has not been used, or not used in time, for the child’s own home).
Incidentally, part of the €100,000 gift may be counted towards the standard gift tax allowance (of just over €5,000, which may be increased to around €25,000). That portion does not have to be used for the donor’s own home.
Example 2
In 2017, a child receives a gift of €50,000 to purchase their own home. In 2018 and 2019, the child receives €25,000 for the renovation of the property. The gifts received in 2018 and 2019 are exempt under the gift tax allowance of €100,000. The amount received in 2017 must be used for the property by 2019 at the latest. The amounts received in 2018 and 2019 must be used by 2020 and 2021 respectively.
In 2018 and 2019, the child may also receive tax-free gifts under the standard allowance (this allowance amounted to €5,320 in 2017).
Duty to report
It is only possible to determine whether the gift tax exemption has been correctly applied at least three years after the gift was made. With this in mind, the period within which the Tax and Customs Administration must have issued the gift tax assessment has been extended by 2 years. This extension applies only to gifts falling within the €100,000 exemption. For other gifts, the assessment period remains 3 years.
In addition, the recipient is required to notify the Tax and Customs Administration that the amount received has not been spent on their own home, or has not been spent on it in a timely manner. This notification must be made before 1 June of the third calendar year following the calendar year in which the gift was received.
Example 3
The child in Example 1 is spending just €90,000 on their own home. This must be reported to the Tax and Customs Administration by 1 June 2020 at the latest.
Expert guidance
A gift tax exemption of €100,000 is, of course, very attractive. However, there are a number of very strict conditions attached to it. Expert guidance on the gift and proper written documentation will help to avoid any surprises later on. VWGNijhof would be happy to assist you.