Gift Tax Rules in Belgium
An Weyn, a private client lawyer at Arteo Law, looks at gift tax rules in a cross-border context.
What Is an Inter Vivos Gift?
Under Belgian civil law, a gift is a contractual agreement by which a donor gives up a movable or immovable property in favour of a beneficiary – without consideration – and by which the beneficiary accepts that property. The donor must have an intention to donate, often also referred to as animus donandi.
The gift agreement must thus respect certain subjective requirements (animus donandi) and objective requirements (enrichment of a part and impoverishment of another).
The Belgian Civil Code states that a gift must normally be made through a notary by registered notarised deed. However, there are some exceptions to this general rule that relate to indirect gifts, such as gifts from hand to hand and bank gifts:
- in the case of a manual gift, movable property (money, jewellery, antiques, etc) simply passes from one hand to another, without any official procedure; and
- an indirect gift by bank transfer is a mere banking transaction in which the donor transfers money from their bank account directly to the beneficiary’s bank account.
What Is the Governing Law Applicable to an Inter Vivos Gift?
With the gift being a contract, the parties are in principle free to choose the law which will be applicable to it, both in terms of form and substance. This stems from Article 3 of the EU Rome I Regulation.
The choice must however be inspired by a certain connecting factor with the law that is chosen, and may not be artificial. A Belgian resident donor who wishes to make a gift to his daughter living in the Netherlands may elect for Dutch civil law to apply to the gift as there is a clear connection with the Netherlands.
However, it is important to keep in mind that the choice-of-law provision has limits, depending, for example, on the law applicable in the country where the gifted asset is situated. A Belgian resident who wishes to give their interest in a company situated in a common law country will not, for instance, be able to make a gift with reservation of usufruct, as the legal concept of usufruct does not exist under common law.
In the context of estate planning, it is always advisable to make an explicit choice-of-law provision.
When Is Gift Tax Due Under Belgian Tax Law?
In principle, making a gift is subject to gift tax in Belgium. However, such gift tax is only due upon registration of the gift.
Gifts must be registered in Belgium when:
- real property situated in Belgium is gifted;
- the gift is made before a Belgian notary; or
- the gift is made before a foreign notary and the donor is a Belgian resident.
Gift tax rates vary based on the region where the gift is registered. In the Flemish and Brussels Metropolitan regions, registered gifts of movables are taxed at a reduced flat registration rate of:
- 3% for gifts between spouses, children, grandchildren, parents and grandparents; and
- 7% for gifts between other individuals.
Gifts that are validly made without having to pass before a notary, such as manual gifts or bank gifts, are not subject to gift tax and can be tax-exempt.
However, if the gift is not registered and the donor is a tax resident in the Flemish or Brussels Metropolitan regions at the time of their death, and they die within three years of the gift, inheritance tax will be due on the amount of the gift. The inheritance tax rates can go up to 27% in direct line (above EUR250,000) in the Flemish region and up to 30% (above EUR500,000) in the Brussels Metropolitan Region.
Please note that the latter provision also targets gifts made by donors when living abroad and who subsequently move to Belgium and die within three years of making the gift.
Risk of Double Taxation
When the donor, the beneficiary and the assets to be gifted are all located in different countries, all the jurisdictions involved may claim a right to apply gift tax. In such situations, there is a risk that the application of the different domestic rules applicable in each jurisdiction would lead to multiple taxation.
The following is an example of how this can lead to gift tax due in several countries on the same estate. A Belgian citizen living in Spain receives, by way of gift, a receivable towards a French company from his uncle, who was a resident in Belgium. Belgium applies gift tax if the gift is made before a notary. Spain might also impose gift tax on the beneficiary, since the beneficiary is a resident of Spain; and, as the asset is located in France, French gift tax may even be due.
No Double Taxation Relief Under Belgian Law
Tax relief basically means that the relevant jurisdiction grants relief for gift tax paid in another country.
In an ideal world, jurisdictions conclude gift tax treaties in which they agree on how to avoid double taxation. Unfortunately, Belgium has not concluded any gift tax treaty.
In the absence of a gift tax treaty with the foreign jurisdiction where the beneficiary is living or where an asset is located, domestic provisions may, however, still exist that allow for double taxation to be avoided.
Unfortunately, Belgium tax law does not provide any domestic tax relief for avoiding double gift taxation.
Proper Analysis Is Required Before Making the Gift
As long as the donor is not living in Belgium at the time of the gift and the gift does not concern Belgian real estate, the gift should not trigger gift tax in so far as the gift is not made before a Belgian notary.
However, if the donor is living in Belgium, the gift will trigger gift tax if made before a Belgian or foreign notary. Where the beneficiary is living outside Belgium or the asset is situated abroad, the gift may lead to double taxation.
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