Sarotic controls on over 1,000 cases of parental benefits and donations are planned by ADE, targeting possible cases tax evasion.
Apart from some who deliberately use the transfer of money to a joint bank account to avoid the IRS, however, the common bank accounts that we all use daily in the family with money transfers can cost us a lot.
When, however, can a simple transfer of money from a joint account to an individual or to another with more syndicates be considered by the tax authorities as an informal donation, which will mobilise tax control with possible tax charges?
The case examined by the Dispute Resolution Administration (TEN) involving a transfer of 240,000 euros from a shared family account, involving their parents and two children, into a new co-management account maintained by the son and his wife is indicative.
The TEN considered that this transaction constituted an informal donation as it did not appear that the son had contributed to the creation of the balance of the original account. Moreover, after the transfer, the money was made available exclusively to him and his wife. For this reason, the application of the taxpayer was rejected.
The decision confirms that the membership of a joint account does not automatically imply ownership of all the money it contains. Since it is shown that a joint venture did not participate in the deposits, but subsequently used the money for the same benefit, the transaction can be treated taxly as a donation.
When the transfer is considered a donation
The current framework provides that when a joint account partner, without having contributed to the formation of the balance, takes over or transfers money for personal use, the transaction may be classified as a donation and taxed accordingly.
In recent years, a significant number of cases of financial parental benefits and donations have been taken to the TEN, with taxpayers challenging taxes and fines imposed on them by the tax authorities. Many of the differences concern parental benefits made with cash instead of through a banking system, but also cases of successive transfers of money considered an attempt to circumvent tax provisions.
On target over 1,000 cases
According to the planning of tax controls, 1,080 cases related to financial parental benefits and donations are expected to be considered this year. The audit authorities focus mainly on cases where there is evidence of circumvention of the tax-free limit of EUR 800,000. The relevant statements are submitted electronically through myProperty platform. ADE then crosses the data with the information sent by banking institutions.
If the bank does not confirm the transaction and the taxpayer does not provide the necessary supporting documents, the tax administration may impose a tax without recognising the tax-free limit. In this case, the tax is levied by the first euro, at rates of 10%, 20% or 40%, depending on the degree of affinity of the persons concerned.
The 5 SOS
1. Tax-free donations up to 800,000 euros: Money donations and parental benefits up to 800,000 euros to first-degree relatives (parents, children, wives, grandparents, grandmothers and grandchildren) are exempt from tax if they are made through a banking system and declared normally.
2. Free cash: When parental provision is made by cash and not by bank transaction, a 10% tax is levied without any tax-free exemption.
3. Transport through IRIS: Sending small amounts from parents to children through direct payment systems, such as IRIS, for allowances or daily needs is not considered a donation and does not require a statement, in particular when the child is a protected member of the family.
4. Successive money transfers: The IRS carefully examines cases where the money is transferred successively between relatives, in order to determine whether the tax-free is being exploited by persons not entitled to it. When such practice is proven, a 20% tax may be levied without tax.
5. Transfers to joint accounts: Special attention is required when the money ends up in a common account of the donor with a third person. Tax authorities can check who finally made use of the money and, if it is found to benefit the third person, charge a donation tax. The experience of recent years shows that money movements between relatives and joint ventures are increasingly at the heart of the controls. For this reason, taxpayers are invited to maintain full documentation of their transactions and to follow the procedures provided for in order to avoid unpleasant tax surprises.
Source: OT
