I'm certainly not Santa Claus

Christmas Eve

Tonight is that time again. Christmas Eve. For the very youngest. Those who are a bit older may have already been able to thank Santa Claus after unwrapping a surprise last weekend.

I'm certainly not Santa Claus

Years ago they sang at Children for Children:

"I'm certainly not Santa Claus.
There's no money tree in my garden.
I'm not Santa Claus.
I have a negative fortune.
When banknotes start growing on my back,
If you are the first to hear this, please come back again.
I'm not Santa Claus (Sinterklaas).
I'm certainly not Sinterklaas (Sinterklaas).
When banknotes start growing on my back,
If you are the first to hear this, come back again."

Many questions about making a donation this year

I was reminded of that again today. We're receiving many requests from parents who want to give their children a gift before the end of the year. Nothing out of the ordinary. But a few requests still concern the "jubelton," even though that has been abolished.

What is a donation

A gift is an agreement without consideration, in which the beneficiary is enriched and the donor is impoverished. This enrichment can be a sum of money, but it can also involve movable and immovable property that passes from one person to the other without consideration. Gifts are common in parent-child relationships.

Whether and how much gift tax is due depends on the relationship between the donee and the donor and the amount of the gift. The donee is liable for the tax unless the gift is made to them tax-free or it is a gift from a parent to a minor child. In that case, the donor bears the gift tax. Furthermore, there are exemptions. The closer the relationship, the lower the rates and the higher the exemptions.

The gift tax rates and the amount of the exemptions are recalculated annually by the Dutch Tax and Customs Administration. On the Dutch Tax and Customs Administration's website, you'll find the rates, exemptions, and a tool to calculate the gift tax due. You can even file your tax return through that website. We can also handle this for you, especially if your calculations are more complex. We have specialized software for this. We can also help you calculate the correct amount.

An alternative way to give tax-free gifts to a child is a tax-free gift on paper. This means you make a gift without actually transferring any cash to the child. The beneficiary, the child, then receives a non-declarable claim against the donor, their parent(s). Should one of the parents die, this claim is deducted from the estate. This means the children pay less inheritance tax and benefit from the annual gift tax exemption. The Dutch Tax and Customs Administration has strict rules for gift on paper. For example, you must record the acknowledgment of debt with a notary, and as a parent, you must pay your child an annual business interest payment. If you have a long life expectancy, this mandatory interest payment can be, or become, difficult. If this interest payment is not made annually, the gift is still included in the inheritance, and inheritance tax is levied on it.

Exemptions

All gift tax exemptions are so-called threshold exemptions. This means that if a gift exceeds the threshold, gift tax is only due on the amount by which the threshold is exceeded.

Other acquirers
The general gift tax exemption is €2,418 per year (2023). This exemption applies, for example, to inheritances passed on by grandchildren.

Children
If (foster) children receive benefits from their parent(s), the aforementioned general exemption will be replaced by an exemption of €6,035 (2023) per year.

One-time increase (children)
Children may choose to replace the €6,035 exemption with €28,947 (2023) for gifts from their parent(s) between their 18th and 40th birthdays. This exemption must be claimed in the gift tax return.

Donation for study: extra increased
If the donation is used for a study with annual costs exceeding €20,000, this one-off increased exemption can be increased to €60,298 (2023).

Gift for a private home. The jubelton is no longer possible.

What was the jubilee?
The "jubelton" was, in short, a tax-free gift of €106,671 for a home. This one-time, substantial exemption was introduced in 2013 to boost the housing market. The goal was to encourage homeownership among young people by encouraging buyers to take out smaller mortgages when purchasing a home. In practice, the scheme had a different outcome. Young first-time buyers didn't take out smaller mortgages but actually bought more expensive homes. The scheme was overhauled on January 1, 2023.

Jubelton has disappeared
As of January 1, 2023, it will no longer be possible to make a large tax-free gift for the purchase of a home. The so-called "jubelton" (jubilee gift) has been reduced and will be abolished entirely in 2024. Anyone who wants to give their (grand)children a jubelton for the purchase of their own home is unfortunately too late to do so. We warned about this in advance last year.

Can I use my equity to make a gift?
Do you own a home that's worth significantly more than your mortgage? Then you can cash in on this equity. For example, by increasing or refinancing your mortgage. You can then gift the resulting equity. Up to €28,947 (2023) is tax-free for your child.

Arrange it at the notary.
Due to the ever-changing legislation and the conditions that are set, it is important to properly record the donation with the notary.

Declaration

If gift tax is due and/or one of the increased exemptions applies, the Tax and Customs Administration must be requested in a timely manner to issue a tax return. However, it is also permitted to file a gift tax return immediately. This can be done online (a DigiD is required) or using a form provided by the Tax and Customs Administration on its website. The gift tax return must be filed within two months of the year in which the gift was received. For gifts received in 2023, the Tax and Customs Administration must therefore receive the gift tax return no later than February 28, 2024. We can help you with this.

Advice on tax-free donations

Gift tax exemptions and rates are generally outlined above. Taxation is, of course, a key factor in deciding whether or not to make a gift. But there are generally more (financial and emotional) considerations to consider. And when executing gifts, careful attention must be paid to ensuring all conditions and formalities are met promptly. It's often wise to have the gift notarized. Would you like advice on financially supporting your child with the purchase of a home this year? Let us know; we're happy to help you get started and, if possible, complete the tax-free gift before Christmas.

You must be Santa Claus!

If you have a money tree in your garden, banknotes growing on your back, or have otherwise managed to amass a positive fortune instead of a negative one (for example, by realizing equity thanks to rising house prices), then quickly put on your robe before the end of the year. You're definitely Sinterklaas after all!