Parents who give money to their children, children who financially support their parents and families who transfer money together bank accounts often consider that the relationship is enough to ensure the duty-free. A recent decision by the Directorate for Dispute Resolution (TEN) The ADE It shows that things aren't that simple. The IRS not only examines who appears as a donor, but also who actually had the money, resulting in a Euro 26,000 cash donation end up in a tax; and fine total height EUR 7,800.
The case involves a $26,000 donation from a daughter to her father. The statement was submitted without tax, as donations of money between first-degree relatives made through a banking system are covered by the tax-free limit of EUR 800,000. However, the audit of AADE was not limited to the donation statement, but sought the actual origin of the money.
The data collected by the tax administration showed that the daughter did not have the financial data that would justify the donation. The tax returns They have shown it in recent years either zero incomes or losses from business activity, while the ability to consume capital has not been sufficient to cover the amount of 26,000 euros. On the contrary, her husband showed significantly higher income, had received a tax refund of EUR 26,019 – an amount almost identical to the transfer in question – and appeared as the principal of the bank transfer from the joint account of the couple.
Based on this evidence, tax administration concluded that a real donor was not the daughter but the... groom. The TEN endorsed this crisis, considering that the daughter was declared as a donor in order to exploit the tax-free rate in force in donations between parents and children and avoid taxation at a rate of 20% provided for donations between a son-in-law and a father-in-law.
This finding completely changed the tax treatment of the transaction. If the money was thought to come from the daughter, the donation to the father would be covered by the tax-free applicable to first-degree relatives. But since it was considered that the donation came from the groom to his father-in-law, taxation of the second category of kinship was applied at a rate of 20%. Thus, the amount of 26,000 euros was charged a donation tax of 5,200 euros and an inaccuracy fine of 2,600 euros, raising the total charge to 7,800 euros.
The taxpayer argued that the account was common between the daughter and her husband and that no matter who gave the transfer order. However, the claim was rejected, as the TEN considered that it was not a critical element which technically carried out the transaction, but who had the real financial capacity to dispose of the money.
Another point of interest is the decision. As the TEN recalls, on the basis of the relevant circular of AADE, the financial capacity of the donor is not considered when submitting the donation declaration, but can be checked in a subsequent tax audit. This means that even if a statement is initially accepted, the tax administration can then seek the actual origin of the money and, if it finds a different real donor, reverse the tax treatment of the transaction.
The decision is essentially a guide to those who make money donations within the family. It shows that AADE is no longer sufficient for the name given in the statement or bank account, but can control income, capital consumption and any available information in order to determine who the actual donor was. If it turns out that the money came from a different person than what was declared, tax treatment can be completely changed, even if the transfer was made between members of the same family.
