Donating without paying gift tax
In principle, all donations require a notarized deed. If the donation is notarized, the notary is required to register the deed, which entails the payment of gift tax. However, it is possible to donate certain types of property without a notary and therefore without the need to register the donation.
It is possible to donate material goods (works of art, jewelry, gold bars, etc.) by handing them to the donee. For security reasons, it is advisable to prepare a document to keep the proof of the donation and to modify it if necessary.
This involves transferring money or securities from the donor’s account to the donee’s account. The transfer as such is not a donation, as it can be used to materialize a loan or the repayment of a debt. For this donation to be valid, a separate document, the joint agreement, must be drawn up, which will show that the transfer has taken place as a donation. Therefore, it is important not to include any notice in the transfer.
The risk period
If the donor decides not to register the gift, he or she must still be alive for a certain period of time to avoid paying inheritance tax on the donated property. The length of this “risk period” differs depending on the region where the donor is resident for tax purposes at the time of his or her death.
In the Flemish Region, the risk period is in principle three years. For donations of family enterprises that are not registered and therefore not made before a Belgian notary, it is even seven years. In the Brussels Capital Region, the risk period is always three years.
For the Walloon Region, the period was until recently three years, but it was recently extended to five years. However, this five-year period only applies to donations made after January 1, 2022.
How can one protect against a death during the risk period?
Registration in extremis.
If the donor becomes seriously ill during the risk period, it is still possible to register the donation. The donation fee varies from 3% to 7% depending on the relationship and region.
This donation can be registered at the Legal Security Office (former registration office) every working day between 8:00 and 12:00. It is also possible to send the documents to be registered to the Legal Security Office by mail or to register the donation through Myminfin.be.
In the Flemish Region, the donation is registered on the date of receipt of the document by mail or via Myminfin.be if the document is received during office hours, or on the next business day if the document is received outside office hours.
In the Brussels-Capital Region and in the Walloon Region, the donation is only registered after payment of the donation tax on the account of the Legal Security Office.
Outside the opening hours of the Legal Aid Office (and therefore at weekends and on public holidays), it is possible to contact a notary in case of extreme necessity, since the registration is valid from the moment of deposit in the official record, even if the registration fee has not yet been paid.
If the registration is made before the donor’s death, everything is definitively settled and no inheritance tax is due upon the donor’s death.
However, there is another solution to eliminate the tax risk created by the risk period. This involves taking out a death cover with an insurance company. This death coverage should then provide for the payment of a death benefit equal to the inheritance tax due on the donated assets in the event of the donor’s death within the risk period. Thus, if the donor dies within three, five or seven years, the heirs can pay the inheritance tax on the donated assets with the death benefit.
However, this latter solution is only financially advantageous if the amount of the insurance premium to cover the risk of death is less than the gift tax due on the donated assets.
Thomas Roelands – Manager of the legal and tax department of Pareto NV