Should the recipient or gift giver pay the gift tax?
As a rule, the recipient has to pay the gift tax. However, the donor may also pay the gift tax. Then the gift tax actually to be paid by the recipient counts as enrichment and is added to the amount for the calculation of the gift tax. Nevertheless, this can make sense if only the expected net amount is given away. That sounds complicated, but it becomes clear in the following calculation example:
Sister A wants to give Brother B 520,000 euros. Let us first assume that recipient B pays the gift tax himself as usual. Then the following calculation results: Donation (enrichment) 520,000 euros – 20,000 tax exempt amount (tax class II, because it is about siblings). The remaining 500,000 are taxed at 25 percent, as shown in the table above. This corresponds to 125,000, so B still has 395,000 euros of the 520,000 euros.
Now let’s assume that A gives this calculated net amount of 395,000 euros to B, but A pays the gift tax himself: 20,000 of the 395,000 euros are now deducted again as an allowance and the remaining 375,000 are taxed at 25 percent. That’s 93,750 euros.
These 93,750 euros are added to the 395,000 euros of the donation, making 488,750 euros. 20,000 euros are deducted from this allowance and the resulting 468,750 euros are taxed at 25 percent. The gift tax is therefore 117,187.5 euros. If you add this to the actual donation amount of 395,000 euros, we get a total of 512,187.5 euros. Thus, A would save 7,812.5 euros, although B would end up receiving the same gift amount as in the example above if B paid the gift tax.
Tip: The costs for tax advice to prepare the gift tax return can also be claimed when determining the amount of the purchase from the gift.