A summer cottage can be donated during your lifetime to your children or grandchildren. Making a gift during your own lifetime is an effective way to save on inheritance and gift taxes.
You can donate less than €5.000 without gift tax
You can make a tax-free gift of parts of a summer cottage if you do so once every three years to one recipient, free of gift tax, in the form of a share of the summer cottage worth less than €5,000. If there are several recipients, each recipient can receive the share tax-free. If spouses own a summer cottage together, each spouse can donate the same share of his or her share to each gift recipient free of tax.
If you donate at once
You can also donate the whole summer cottage. In this case, the recipient will pay inheritance tax on the gift.
Lifetime tenure reduces gift taxes
You can and should include a condition that the donor retains the right to the summer cottage for life. With this condition, the donor secures his right to use the summerhouse. In turn, the donors receive a significant tax relief in the form of a deduction for the right of tenure in the tax on the gift.
Example of gift tax
For example, in the case of a gift of a summer cottage, the donor retains the right of ownership of the gift, even though ownership is transferred to the donee. The retention of title does not affect the fair value of the gift, but it does affect the value on which the gift tax is based.
The tax administration calculates the value of the right of possession for you when you declare on the gift tax return that the donor has retained the right of possession of the gift. The gift tax is calculated on the fair market value less the value of the right of possession.
Article written by Lawyer Tuula Rainto, Amos Law Firm. You can always call him free of charge on 010 299 5090. You can consult our price list Here
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