Taxes on Gifts to Children: What You Need to Know Before Donating Money or Goods

For which goods, if given to children, must taxes be paid in addition to taxes (little known) on the money given? Deciding to give money or other goods as a gift always implies fulfilments to carry out the transfer of goods in a correct and legal way. And there are also costs in the case of gifts to children of both money and other goods. Let’s see what they are.

• For which goods if given to children taxes have to be paid
• What taxes are paid on donated money

For which goods if given to children taxes have to be paid

According to the provisions of the laws in force, when a transfer of money, houses or other real estate takes place, taxes relating to the transfer of real estate are paid as a mortgage tax of 2% of the cadastral value of the property and a cadastral tax of 1%, and if the donee receives the asset as a first home, the two taxes are fixed at 200 euros, stamp duty of 230 euros and registration tax from 200 euros.

Another expense to be incurred when a house or other real estate is given to a child is that relating to notary’s feewhose deed is mandatory for the donation of a property, which does not have a fixed cost but depends on various factors such as the category and the cadastral income of the property.

If the value of real estate or money given to children is very high, together with the aforementioned taxes, it must be also pay the donation tax which provides for different rates depending on who makes the donation.

The taxes that are paid on donations are due only if the assets transferred to the children exceed certain value thresholds and provide for different calculation rates for the payment which are:

• 4% for spouses and direct relatives, for a deductible of 1 million euros for each beneficiary, whereby the tax is levied only if the donation of money exceeds one million euros or the value of the property or properties donated exceeds one million euros;
• 6% for other relatives up to the fourth degree, by affinity in the direct line, and by affinity in the collateral line up to the third degree, for a deductible of 100,000 euros for each brother or sister;
• 8% towards other subjects.

If the recipient of the donation is a seriously disabled person, the deductible for the payment of the tax on donations rises to 1.5 million euros.

For goods, movable or immovable given to children, therefore, a rate of 4% is paid on the value of the donation net of the deductible up to one million euros.

What taxes are paid on donated money

When money is given to children, taxes are generally not paid if it is a transfer of money of a so-called modest value, i.e. if the sum of money to be given to the children is not too high, and, to avoid checks and assessments, the council is always to carry out the transfer of money to the children with traceable instruments, such as wire transfers or checks, in order to always be able to clearly justify the operation.

In reality, there is no universal definition of ‘modest value’, because it usually depends on the economic conditions of the person giving away the money. If, however, the gift of money to the children is not of modest value because it is of a decidedly high amount, then to avoid running the risk of checks and assessments, the advice is to make the donation of money always by contacting a notary for a public act.

In this case, the notary’s fee and gift tax must be paid if the amount of money given to the children exceeds certain thresholds.

We specify that, according to current laws, for gifts to children in general, not just money, no tax is paid in the following specific cases:

• for gifts of money of modest value;
• for donations of quotas or shares of companies or branches of companies, but only and exclusively if the donations are in favor of children or even spouse or parents;
• for living expenses, marriage, education, clothing;
• for car or motorcycle donations, because according to what has been established, all donations concerning vehicles registered in the Pra are not subject to the payment of the tax on donations;
• for transfers with a specific purpose, for example the purchase of a new car or a house (indirect donation).