GER: Binding Gift-Tax Valuation

Dec 1, 2023 Benn-Ibler Rechtsanwälte

If the value of a property is determined separately, it is binding for all subsequent gift tax assessments. According to the Federal Fiscal Court (Bundesfinanzhof, hereinafter BFH), if the donee considers the assessment to be too high, they must appeal directly. Otherwise, for all further gifts within a 10-year period, the assessed value will always apply.

In 2012, the plaintiff acquired a half co-ownership share in an undeveloped plot of land as a gift from his father. For gift tax purposes, the values of all the gifted assets were determined by means of assessment notices. The property was valued at just under EUR 90,000. The son did not have to pay any gift tax as the value of the property was below the tax-free amount for children of EUR 400,000. In 2017, the plaintiff received a further EUR 400,000 from his father free of charge.

Under Section 14 of the German Inheritance and Gift Tax Act, all benefits received by the same person within ten years are aggregated.

The tax office therefore accepted the value of the property as it had been determined in connection with the first gift. The gift tax assessed was approximately EUR 10,000.

The son objected that the value determined at the time had been too high. The only reason he had not objected to the incorrect property value was because the gift tax was EUR zero anyway. The tax assessment could only have been interpreted similar to the one for the original gift.

Finally, the son filed a complaint. However, the BFH rejected a downward adjustment of the value of the property.

When considering the value of the original gifted property, the procedural peculiarities of determining the value of the property must be taken into account. Unlike other value assets, such as money, the value of property for gift tax purposes must be determined in a separate procedure. The BFH is of the opinion that the value thus determined should not only be the basis for the calculation of gift tax. Rather, it also applies to all subsequent gift tax assessments within the 10-year period.

BFH, II R 35/21 (26 July 2023)