Duty to disclose a Gift in Germany
According to Section 30 (1) of the German Inheritance and Gift Tax Act (ErbStG), any acquisition subject to German gift tax (gift, donation, or other fully or partly gratuitous transfer) must be reported (duty of disclosure/reporting obligation). A notification if there is a gift contract notarized by a German notary (Notar).
The purpose of the notification is merely to enable the tax authorities to check whether a taxable transaction has taken place. See Federal Fiscal Court ruling in BFHE 181, 351, BStBl II 1997, 73. Therefore, the possibility that German gift tax may be payable is sufficient, e.g., because the donor or the donee may be a German tax resident (Inländer) for German inheritance and gift tax purposes.
Whether Germany is prevented from imposing German gift tax by a double taxation agreement in the area of inheritance and gift tax is irrelevant, as the double taxation agreements do not (directly) deal with reporting obligations.
Persons required to submit a notification
The reporting obligation applies to the acquirer, e.g., the recipient of a gift (donee) or beneficiary of an opaque trust.
However, the transferor (donor, trustee) may also be obliged to report the potentially taxable transfer.
Deadline for notification
The notification must be made within a period of three months. The period begins at the point in time at which the person obliged to notify becomes aware of the acquisition (e.g., through a gift).
The distribution from an opaque trust typically is only to be reported when the distribution is effected (e.g., through payment). However, if the distribution is made upon termination of the trust (e.g., because the trust terminates when the surviving spouse dies), the taxable acquisition may occur earlier, and it may be advisable to report it earlier.
Exemption from the reporting obligation
No notification is required if a gift between living persons has been certified by a German court or German notary.
The notification requirement also applies if the tax office has been informed by other means (for notification by heirs: Federal Fiscal Court (BFH) ruling of October 30, 1996, II R 70/94, BStBl II 1997, 11).
Contents of the notification pursuant to Section 30 of the German Inheritance Tax Act (ErbStG)
In accordance with Section 30 (4) of the German Inheritance Tax Act (ErbStG), the notification must contain the following information:
- First name and surname, occupation, address of the donor and the recipient;
- Date on which the gift was made;
- Subject matter and value of the acquisition;
- Legal basis for the acquisition (gift, purpose-related donation, distribution from an opaque trust);
- Personal relationship of the recipient to the donor, such as kinship, affinity, relationship;
- Previous gifts made by the donor to the recipient (e.g., beneficiary) according to the type, value, and date of each donation.
Please note: This is the minimum information required. However, it will often be advisable to provide further details. For example, if Germany is precluded from taxing the gift by a double taxation agreement in the area of inheritance and gift tax, this should be explained. If the gift is made via a trust (e.g., a bare trust), the structure of the trust should be explained and why the distribution is subject to German gift tax or not (for more information, please refer to the article "Taxation of U.S.-Trusts under the German Inheritance and Gift Tax Act").
Proper Gift Tax office
The acquisition notification must be filed with the tax office responsible for inheritance and gift tax returns (inheritance tax office).
Local jurisdiction is determined by § 35 ErbStG. According to this, the tax office responsible for determining gift tax at the donor's place of residence is locally responsible for a gift if the donor was a resident of Germany at the time the gift was made.
If the donor was not a resident of Germany at that time, the tax office at the place of residence of the acquirer (recipient) is responsible.
Form and templates for the reporting letter
The acquisition notification must be submitted in writing. No official form must be used. However, most German States (Bundesländer) provide templates on their websites (z.B. Berlin oder Bavaria).
Please note: In the case of more complex gifts, it is often not advisable to use such templates.
Consequences of non-compliance with the duty of disclosure
If the person obliged to disclose the gift does not comply with the duty to disclose the gift, there is no penalty unless this results in the underpayment of gift tax. Thus, because the allowances have not been exhausted or because there is a tax exemption, failure to comply with the duty to disclose often does not result in a penalty.
Further proceedings
On the basis of the notification and further information received by the tax office from third parties (e.g., German probate court, customs, income tax office), the gift tax office checks whether German gift tax may be payable. If it concludes that gift tax may be payable, it will ask the donor or the donee to file a German gift tax return (Schenkungsteuerererklärung).
Our service: We will be happy to prepare the notification and/or the German gift tax return (Schenkungsteuererklärung) for you.
