A change in the law is in the pipeline, which regulates that donations of homes will no longer be based on the WOZ value.
Fiscal Collective Act 2027
This is contained in the Fiscal Collections Bill 2027, the draft of which was recently made available for internet consultation has been laid. The target effective date of the change is 1 January 2027. The fair market value will be taken into account for gift tax from then on.
That value can be determined through a valuation. The reference date for the valuation is the day of acquisition of the property. The fact that the property must be valued after the change in the law is not seen as an additional administrative burden, as the fair market value must be determined anyway for the purposes of transfer tax.
When a property under inheritance law is obtained, the property will be subject to inheritance tax at its WOZ value even after 2026.
Unwanted
The reason for implementing this amendment to the Inheritance Tax Act is that the Cabinet considers it undesirable that gift tax is evaded with constructions that make use of the difference between the WOZ value and the fair market value (WEV).
The (draft) explanatory memorandum contains the following examples of these undesirable constructions:
- A donates a house to B. WOZ value €300,000 / WEV €350,000. Then B pays gift tax on €300,000 and immediately resells the house for €350,000.
- C sells a house to D and waives the purchase price a week after delivery. WOZ value €450,000 / WEV €425,000. D pays gift tax on the remitted purchase price of €425,000.
- E sells a property to F for the WOZ value of €400,000. The WEV is €450,000. Despite there being a material gift of €50,000, F pays no gift tax because the property is valued at the WOZ value of €400,000 for gift tax purposes.
If you intend to gift your home, it is wise to consider doing so, if possible, before 2027.