Christmas: When a Gift turns into a Donation

December is the month of winter, of hot chocolates in front of the fireplace, of Christmas lights in the streets and, above all... it is the holiday season! Be it for Saint Nicholas, Christmas or New Year’s Eve, December really is the month of gifts. And, at some point in life, those gifts usually look more like an envelope containing a few dozen euros. However, from the tax authorities’ point of view, if the envelope is too packed, it could be considered as a donation! So, where does the difference lie and how can we avoid having to report our Christmas gifts to the tax administration? 

Why is this distinction that important?

A gift or a donation, it is basically the same thing, right? Well, not for the tax administration! Indeed, as opposed to a gift, a donation is taxable. And that is exactly the important difference that generous parents, grandparents, uncles and aunts should bear in mind when preparing their gifts for the holiday season. 

 

What do you mean, "taxable"?

Indeed, if the donation has not been registered and the donator dies within three years, inheritance taxes will have to be paid. To avoid possibly having to pay such taxes, the donation may be registered, which involves paying donation taxes. In that case, no one would have the right to later request any inheritance tax on the donated assets.

In Flanders and Brussels, donation taxes range from 3 to 7%, depending on the relationship between the donator and the beneficiary. In Wallonia, those taxes vary between 3.3 and 5.5%.

Given is given!

The gift has one more advantage: a gift is irrevocable. Indeed, there is no way that your Christmas gift goes back to Santa’s workshop! However, in the case of a donation, it will be taken into account when settling the inheritance in order to check that all the heirs have actually received their minimal share of the estate (e.g. children that should receive half of the estate divided by the number of children). 

 

How much may I give while making sure that my gift remains a gift?

As such, the law does not specify anything when it comes to gifts. Yet, it is generally acknowledged that one may offer gifts amounting to 1% of their total estate each year. It thus all depends on the donator’s estate, which is comprised of all his movable and immovable assets as well as his stocks and obligations. For example, if Gramps’ estate amounts to 1 million euros, he may offer €10,000 as gifts to his children and grandchildren (every year if he is particularly generous).

There are various options to offer a gift: by simply putting some money in an envelope for the one(s) that we wish to spoil or by sending a bank transfer. To avoid any doubt, the best solution is to specify in the communication that it is actually a gift, for example by writing “Merry Christmas”, “Enjoy your birthday” or “Lucky you, Saint Nicholas came for you”. Obviously, gifts are not limited to the holiday season: they may also reward good grades at school, a joyful event or a birthday. Well then, who will be the most generous this year: Saint Nicholas or Santa Claus?