Are tax reliefs available on gifts (either during the donor’s lifetime or on death) to a spouse, civil partner, or to any other relation, or of particular kinds of assets (e.g. business or agricultural assets), and how do any such reliefs apply?
Private Client (2nd edition)
Yes, there are prescribed reliefs that apply to lifetime gifts and to inheritances on death.
Transfers between spouses / civil partners
Transfers between spouses / civil partners are exempt from both gift tax and inheritance tax, CGT (unless the recipient spouse is outside the CGT charge in the year of the gift), and stamp duty.
Business relief is available in respect of business assets and unquoted shares in trading companies or holding companies. The effect of the relief is that the taxable value of the business assets is reduced by 90%. The relief is subject to certain restrictions, including retention periods.
Agricultural relief is available for gifts and inheritances of ‘agricultural property’ (as defined in CATCA) taken by a person who is, on the valuation date and after taking the gift or the inheritance, a ‘farmer’ (as defined CATCA). The effect of the relief is that the taxable value of the agricultural assets is reduced by 90%. The relief is subject to certain restrictions, including retention periods.
If the recipient qualifies for both agricultural relief and business relief in respect of a gift or inheritance, he / she can only choose one relief.
The most important tax reliefs concern the family dwelling and the assets of family owned businesses or shares of family owned companies. In the Flemish Region, as from 1 September 2018, a new inheritance tax exemption was introduced for the first EUR 50.000 of movable assets that are inherited by the deceased’s partner.
In all three regions, the part of the family dwelling that is inherited by the partner is exempt from inheritance tax. The ‘partner’ is defined as (i) the deceased’s spouse, (ii) his legal cohabitant or – but only in the Flemish Region – (iii) the person with whom he has cohabited de facto for at least three years and with whom he has had a common household. In the Walloon Region, the exemption is subject to the supplementary condition that the family dwelling has served as main residence of the couple for at least five years at the time of the deceased’s death.
Since 3 September 2018, none of the regions provide for a specific regime for the donation of the family dwelling anymore.
Family owned businesses and companies
Each region has a specific regime for the donation or inheritance of assets invested in a family owned business or shares of a family owned company, subject to certain conditions. The conditions in the Flemish and Brussels Capital Region are almost identical. In the Walloon Region a reform of the current regime has been announced, which is expected to result in a similar regime as the current Flemish and Brussels regime.
In all three regions, a donation of those assets or shares is tax exempt if all conditions are met. In the current Walloon regime, the exemption can also apply to shareholder loans to the family owned company.
If inherited, these assets or shares are taxed at a flat inheritance tax rate of 3% or 7% in the Flemish and Brussels Capital Region. In the current Walloon regime, the conditions are more strict, but if met, an inheritance tax exemption applies to these assets or shares and even to shareholder loans to the family company.
All outright transfers by gift or bequest to a US citizen spouse qualify for the unlimited marital deduction and are not subject to gift or estate tax. Transfers in trust during lifetime or at death to a US citizen spouse will qualify for the unlimited marital deduction if during the spouse’s lifetime the trust (the ‘Marital Trust’) (1) is for the sole and exclusive benefit of the spouse; (2) no distributions from the trust may be made to any other person; and (3) all of the net income of the trust is required to be paid at least annually to the spouse. Likewise, property passing in the form of a life estate to a spouse in which some or all of the income is payable to the spouse but over which the spouse is granted a testamentary general power of appointment, will qualify for the unlimited marital deduction. The marital deduction is designed to defer the imposition of any transfer tax otherwise due on the transfer until the later death of the spouse.
No distinction is made between transfers to an opposite-sex spouse and transfers to a same-sex spouse.
No marital deduction is available with respect to a transfer outright to or in trust for a spouse who is not a US citizen unless the transfer is made by the donor spouse (or by the donee non-citizen spouse following receipt thereof) to a Qualified Domestic Trust (QDOT) containing statutorily-mandated provisions designed to ensure that any transfer tax otherwise due on the transfer will be paid eventually to the US. A QDOT must be maintained under the laws of a US state or the District of Columbia and the governing instrument thereof must be governed by the laws of a US state or the District of Columbia. Generally, a bank or trust company organized within the US must act as a Trustee, and QDOTs over a certain size must provide for the filing of a bond with the US Treasury. In other respects, a QDOT must contain the provisions required above for a Marital Trust. Distributions of principal from a QDOT to the noncitizen spouse will attract US estate tax at the donor spouse’s estate tax bracket. Relief from the QDOT requirements may be available if the spouse becomes a US citizen and meets certain residency requirements.
Not applicable - there are no succession taxes, and no taxes on lifetime transfers.
For tax relief on gifts to a spouse, civil partner, and to any other relations please refer to the answer of question 5 above.
Buenos Aires Province Tax Code (Section 320 of Provincial Law 10.397) provides that certain heirs (surviving spouse, ascendants and/or descendants) will be exempt of ITGB when they receive mortis causa any of the following assets:
- Homestead (Vivienda Familiar, according with Section 244 of Argentine Civil and Commercial Code hereinafter “CCC”)
- Real property entirely destined for the housing of the decedent or his family, provided that it is the only property and its assessed value does not exceed ARS 962.000 (for Fiscal Period 2018).
- Company, whatever its form of organization provided the valuation of its assets does not exceed the amount established by Law (ARS 17,910,000, for fiscal period 2018) and as long as the activity is effectively maintained following five years from the death of the decedent. Otherwise, they must pay the tax reassessment for the remaining years to obtain the benefits of the exemption. Notwithstanding the foregoing, when the income of the Company deriving from rents and financial assets exceeds ARS 17,910,000 (for Fiscal Period 2018) this exemption will not apply.
No tax is levied on gifts between ascendants and descendants in direct line (ie parents and children) or between spouses. Otherwise, see question 5.
Exemptions from inheritance and gift tax are laid down for certain assets. Assets of cultural value that have been recognised as such by the Italian competent authorities prior to the death/gift of the individual are exempt from inheritance and gift tax. A 50% exemption applies to the Italian real estate of cultural value recognised as such after the decease/gift. Italian public debt securities are free from inheritance tax. The exemption applies also to public debt securities issued by EU or EEA Member States.
In order to facilitate the generation transfer of businesses, an exemption from inheritance and gift tax applies to the transfer of businesses and participations in companies and partnerships to spouses or descendants. For participations in companies, the exemption is subject to the additional condition that the recipient receives or reaches a controlling shareholding. The control must be retained for five years following the transfer, otherwise the exemption will be clawed back.
Gifts of Bermudian property to a surviving spouse on death are exempt from stamp duty.
There is no stamp duty relief for gifts of Bermudian property to spouses during lifetime, but due to the lower rates of stamp duty payable lifetime gifts can be effective way of reducing the value of an estate.
6.1 Transfers between spouses and civil partners (whether during life or on death) are generally exempt from inheritance tax (§5). However, this exemption is limited to £325,000 if, at the time of the transfer, the transferor is domiciled (§1.9) or deemed domiciled for inheritance tax purposes (§5.9) in the UK and the transferee has neither such status. If the transferee elects, after the transferor's death, to be treated for inheritance tax purposes as domiciled in the UK, the exemption is unlimited, but the transferee then suffers the other inheritance tax consequences of being treated as domiciled in the UK, unless and until he has completed a period of 4 successive tax years (§2.13) of non-UK residence (§1.5-1.7) beginning any time after the date of the election.
6.2 For the purposes of capital gains tax (§2.6), while the disposal of an asset by way of gift is generally deemed to be for a consideration equal to the market value of the asset (§5.10), where the gift is between spouses or civil partners who are living together, the donee's base cost in the asset is generally deemed to be the donor's, so that no chargeable gain (§2.7) arises.
6.3 Lifetime gifts are exempt from inheritance tax (§5) if their value does not exceed £3,000 in each tax year (§2.13), and this exemption can, to the extent unused, be carried forward to the next tax year. In addition, lifetime gifts made by an individual in any one tax year to any one person are exempt from inheritance tax if their total values do not exceed £250. Further, regular lifetime gifts made by an individual out of his spare income are exempt from inheritance tax if they are part of his normal expenditure and do not diminish his normal standard of living. Gifts within certain limits made on the occasion of a marriage or civil partnership (e.g. a gift of up to £5,000 by a parent to a child who is getting married) are exempt from inheritance tax.
6.4 Agricultural property may enjoy complete relief from inheritance tax (§5) on a lifetime transfer or on death. Relieved agricultural property includes not only farmland but also cottages, farm buildings and farmhouses of a character appropriate to the land, but in each case only to the extent of the agricultural value of such assets (and not, for example, in respect of development value). For the relief to be available, the agricultural property must have been (i) occupied by the transferor for the purposes of agriculture for two years before the date of the transfer or (ii) owned by him throughout the period of seven years ending with that date and occupied throughout that period (by him or another) for the purposes of agriculture.
6.5 Business property may also enjoy complete relief from inheritance tax (§5) on a lifetime transfer or on death. The relieved property may consist of shares in a company which carries on the business (or in its holding company), or of a direct interest in the assets of a business. The full relief is not available in respect of shares listed on a recognised stock exchange, with the Alternative Investment Market (AIM) not being "recognised" for this purpose. The relief is not available where the business consists wholly or mainly of dealing in securities, stocks or shares, land or buildings or making or holding investments. The relief is restricted where non-business assets or surplus cash are held by the company. For the relief to be available, the business property must have been owned by the transferor for two years before the date of the transfer.
Inheritances, gifts and donations are subject to capital gains tax in Colombia at a 10% rate. The transfer of any real estate involved would also trigger registry tax (of approximately 1.5%).
Generally, the applicable taxable base shall be the assets or rights’ cost basis as of 31 December of the previous year. The following income is considered as exempt for capital gains purposes:
- The equivalent to 7,700 Tax Value Units (Approx. USD 90.000) of the deceased's urban property;
- The equivalent to 7,700 Tax Value Units (Approx. USD 90.000) of the deceased's rural property excluding recreational housing;
- The equivalent to 3,490 Tax Value Units (Approx. USD 40.000) of the value inherited by the deceased's surviving spouse and heirs;
- 20% of assets or rights received by individuals not considered as heirs or surviving spouse;
- 20% of assets or rights gifted or transferred by the deceased during their lifetime that were received gratuitously by a beneficiary without exceeding 2.290 Tax Value Units (Approx. USD 26.000); and
- Books, clothing, personal belongings and furniture belonging to the deceased.
Stamp duty is payable on the transfer of Cayman Islands real estate. The stamp duty rate across the three islands which make up the Cayman Islands is 7.5% of the higher of the purchase price or market value of the property. Stamp duty is calculated in Cayman Islands dollars.
Pursuant to the Stamp Duty Law (2013 Revision) for gifts of real estate stamp duty will be CI$50 when the transfer is stated to be for the "natural love and affection" between parent and child, husband and wife, brothers and sisters, grandparents and grandchildren. In all other cases, the full rates of duty will apply. There is also a CI$100 stamp duty on purchase agreements.
There are personal allowances available for transfers on death or by gift which are available every 10 years. E.g. the allowance for spouses is € 500.000, for children € 400.000, for grandchildren € 200.000. There are also allowances for certain assets that may apply, e.g. for the transfer of the family home. Business property relief may apply with up to 100% for transfers of business (including shareholdings) or agricultural assets. However, this is subject to various conditions to be tested in the individual case.
As set out at Question 5, there is no tax on gifts in Singapore.
There are Stamp Tax exemptions foreseen regarding transfers (by succession or by donation) between spouses, ascendants and descendants.
As explained in § 5.1, several allowances apply depending on the relationship between the donor and the donee.
Transfer by death of shares of operational companies may, under certain restrictive conditions benefit from a partial inheritance tax exemption amounting to 75%.
See above, not relevant.
As stated in question 5, according to article 93, section XXIII of the Mexican Income Tax Law gifts made between spouses or descendants of their ascendants in principal degree and the gifts made by ascendants of their descendants in principal degree, provided that the goods received are not sold or donated by the ascendant to another descendant in principal degree, are exempted of paying income tax in Mexico.
ITCMD tax exemptions vary according to the state legislation where the taxable event takes place. For instance, São Paulo provides an exemption of up to BRL60,000 donations for each consecutive 12-month period. Besides that, if a person is married on total communion of goods, the spouse has the right of 50% of the total assets held by the couple (including inheritance, donations and income from professional activity), if one of them dies, without the levy of ITCMD since the remaining person already owns that amount. On the other hand, if a person is married on partial communion of goods, the spouse has the right of 50% of the assets earned during the reunion of the couple. Inheritance earned by each one of them, does not communicated to the other. Partial communion of goods is the default regime in force, which means that if a couple (effective married or just living together) prefers another regime, they have to sign premarital agreement or define it at the moment of marriage.