Gifting property without paying stamp duty?

Suppose you have commercial premises that you would like to gift to your child. In that case, both transfer tax and gift tax are payable. However, the law includes a so-called ‘concurrence rule’ which allows the transfer tax paid to be deducted from the gift tax due.

Donation

Suppose a father gifts a commercial property to his daughter. The property is worth €300,000.

Transfer tax

The transfer tax is calculated on the basis of the market value of the commercial property being transferred. In 2021, the tax rate for property in which the purchaser does not intend to live was increased from 6% to 8%. The rate of 8% therefore applies to commercial premises.

8% transfer tax on €300,000 = € 24.000.

Concurrence Scheme

The transfer tax of €293,396 may be set off against the gift tax. This is, in fact, the amount on which gift tax is levied.

The associated transfer tax is € 23.472 (8% of €293,396). This reduces the gift tax payable from €45,804 to €22,332. As a result of the set-off, the amount of gift and transfer tax due is €46,332 instead of €69,804.

Taking advantage of the favourable gift tax rate twice

The concurrent events rule also applies where there is a sufficient link between the transfer of the property and a waiver at a later date.

There is deemed to be sufficient connection if the waiver of (part of) the purchase price takes place within 14 days of the transfer of the property. If the transfer takes place shortly before the turn of the year, it is therefore possible to spread the gift over two calendar years. As a result, the exemption applies twice and the lower rate of 10% applies twice.

By gifting the business premises, the transfer tax can be set off almost entirely against the gift tax. As a result, the increase in the transfer tax rate from 6% to 8% has hardly any impact.

Are you considering gifting a property to a child? We’d be happy to help you work out how to do this in the most tax-efficient way possible!