The gift tax (gift tax)

Donation by deed or not?

Real estate is donated by means of an authentic deed at a notary, but in principle a notarial deed is also required for movable property according to the Civil Code. So there is also gift tax.

There are some possibilities under the heading of donation that, strictly speaking, do not require a notarial deed and therefore no gift tax is due. This is a hand gift, so cash money can pass from hand to hand through a donation.

A variant of this is the bank gift whereby one transfers cash or securities from one account to another. This is also a donation, albeit an indirect one. The fact that you work via bank transfer also gives you the advantage of having a bank statement. This is not conclusive evidence in itself to determine the date of the donation, but it is nevertheless an indication if discussions should arise about e.g. it falls or does not fall within the period of three years before the death (whereby gifts in that period may still give rise to inheritance tax).

When making a donation, it is important that the endowment purpose (they also speak of 'animus donandi') is sufficiently prominent, otherwise one can have unpleasant discussions about the money transfers via the bank account: was it a donation or a loan? It is best to put something in the announcement that hints at this: e.g. implementation of the donation.

If you want to arrange things more conclusively, a so-called 'pacte adjoint' is interesting, in that special 'accompanying document' you can also determine some modalities (conditions), if this is also within certain limits. According to the Court of Cassation (Cass. 22 April 2010) you do not need to register the pacte adjoint (signed by both parties). If you were to register it, this will lead to gift tax.

An interesting alternative is to include certain modalities or implementation regulations in a prior letter of intent, given that Vlabel (the Flemish tax administration) is strict for certain regulations (such as conventional return or contribution regulations) that only appear for the first time in a pact adjoint.

In the legal and insurance practice there are interesting formulas to absorb the possible financial consequences of inclusion in the inheritance tax, for example the so-called ABA insurance.

Rates real estate

There is no one and the same rate for the whole of Belgium. The rates are fixed at regional level (Flemish Region, Walloon Region, Brussels-Capital Region). You must look at the place of residence of the donor at the time of the donation to find out which rate applies. There is also a reference period of five years for the donation if there are several recent residences, then one looks at where the donor has lived the longest to determine which region can charge. In the case of a gift of immovable property by a non-resident, the regulation falls under the region where the immovable property is located.

In Flanders there is a rate for the direct line (parents, children) and partners and a rate for all other persons. The rate also depends on the volume of the donation (progressive rate).

The rate for a donation in a direct line and between partners is 3% from the first euro cent up to and including 150,000 euros, above and up to 250,000 you pay 9%, above that up to 450,000 18% and for the rest 27%.

The rate for gifts to other persons (family members or not) is 10% from the first euro cent up to and including 150,000 euros, above that up to 250,000 euros 20%, above that up to 450,000 euros 30% and the rest 40%.

There is a cheaper rate for real estate where there is a commitment to carry out renovation work for at least 100,000 euros within five years or to obtain a conformity certificate within three years and to conclude a registered lease for at least 9 years. Then the rates (for the same tranches as above) are respectively 3%, 6%, 12% and 18% for direct line and partners and 9%, 17%, 24% and 31% for gifts to other persons.

Rates movable property

These checkers do not play a role in the case of donations of movable property. There is one uniform rate, regardless of the size of the donation. Here too, a distinction is made between donations to the 'straight line' or partners on the one hand (3%) and all other persons (7%). This is at least the arrangement in Flanders. In Wallonia people work with other classifications, there is also a rate of 5% for gifts to brothers/sisters/uncles/aunts/cousins/nieces.

Who is 'partner' and who is in the 'straight line'?

For the Flemish gift tax, the concept of 'partner' is viewed broadly, it refers to married couples as well as to legal cohabitants, but also to de facto cohabitants, provided that there has been a joint household for at least one year.

The 'straight line' in turn means: the parents, the grandparents, the great-grandparents, the children, the grandchildren and the great-grandchildren. An adopted child also falls in the direct line, at least if it concerns a full adoption, with an ordinary adoption there are conditions (adopted child is the child of the partner of the adopter or under the guardianship of an institution or has been cared for or adopted for three years or no other descendants). A care child also falls in the direct line under certain conditions (three years of care), just like a related and recognized child out of wedlock. Donations between ex-partners also fall under 'straight line' if there are common descendants.
There is another (modest) rate reduction for beneficiaries who have at least 3 children under the age of 21.

Push up effect

When donating real estate, account is taken of previous real estate donations between the same parties established by deeds dating less than three years before the date of the new donation. For example, there is a progression proviso, which means that you will reach the higher rate brackets faster with later donations within three years.

0%

From July 2021 you can donate at 0% to governments (states, Region, Community, provinces, municipalities, public institutions, etc.), recognized housing companies and non-profit organizations. This forms part of the compensation for the abolition of the so-called duo legacy.

But donations from family businesses or shares in a family company can also be made at 0% in Flanders (in Brussels and Wallonia this is 3%).

It is important with the donation of the family business that the business continues and that the real estate in the donation is only used professionally. For the company, the activity may possibly take place via a holding company. In order to verify whether there is real economic activity, conditions are also imposed on remuneration, social charges and pensions, which must be more than 1.5% of the value of the assets.

Another criterion concerns real estate: a lack of real economic activity is assumed if the land and buildings constitute more than 50% of the asset. It is important that you respect these conditions for three years. There may also be no capital reduction during this period and you may not move the registered office outside the EEA.

Legacy Leap

If you have acquired something through an inheritance, you can donate it in whole or in part without gift tax within one year after the death of the testator.