Inheritance and Gift Tax Issues with Joint Bank Accounts

Inheritance and Gift Tax Issues with Joint Bank Accounts

Joint bank accounts – Inheritance tax and gift tax issues

Based on law 4916/2022, the exemption from Greek inheritance tax that applied for deposits maintained in joint bank accounts held in Greece was extended also to joint bank accounts held abroad, with the exclusion of non-cooperative tax jurisdictions. The exemption covers accounts in cash deposits and all kinds of securities.

In order for the exemption to apply, the contract with the foreign bank should include a clause providing that after the death of any of the co-beneficiaries of the joint account the deposits are automatically transferred to the other living co-beneficiaries, i.e. without the operation of inheritance rules. It is reminded that the same clause needs to be included in the contract with a Greek bank.

The law provision refers explicitly only to the exemption from inheritance tax and not from gift tax. Therefore, Greek inheritance tax will not be triggered if the co-beneficiary of the joint-bank account withdraws money after the death of the other co-beneficiary, regardless of the subsequent use of that money e.g. for the purchase of real estate or other assets in Greece or abroad.

However, there is a potential risk that the Greek tax authorities may consider, upon a tax audit, that Greek gift tax may potentially be triggered upon either of the following occasions:

  • a) Upon the withdrawal of money from the joint bank account during the other co-beneficiary’s lifetime, in excess of any amounts deposited in the joint bank account by the co-beneficiary withdrawing the money.
  • b) After the death of the other co-beneficiary, upon the future use of said money (again in excess of any amounts deposited in the joint bank account by the co-beneficiary withdrawing the money) e.g. for the purchase of real estate or other assets either in Greece or abroad.

The above risk does not derive explicitly from the law but from tax audit practice or case law.

Greek gift tax may be relevant for foreigners, as it is imposed, among other cases, to any movable property located abroad of a foreign national that is donated to a Greek or foreign national who has his residence in Greece.

It should be highlighted that as of late 2021, a tax-exempt threshold (one-off) of Euros 800,000 applies to the parental gift or the gift to specific categories of close relatives of any asset, as well as the parental gift or the gift of cash to the above persons which is carried out by money transfer through financial institutions. Any excess amount is subject to 10% gift tax. https://www.taxlaw.gr

Natalia Skoulidou specializes in Tax Law and has signification professional experience of 15 years in a broad range of tax areas, with a particular expertise on Greek and EU VAT issues, indirect tax issues, international tax issues and corporate tax and restructuring. She and her team at Iason Skouzos Tax Law are happy to help you with assist you with any legal matters regarding tax or otherwise in Greece and around the world.

Natalia Skoulidou

Natalia Skoulidou

Iason Skouzos Taxlaw

taxlaw.gr

joint bank account

Theodoros I. Skouzos

Iason Skouzos Taxlaw

taxlaw.gr

Tax residency in Germany – An Unpleasant Surprise!

Tax residency in Germany – An Unpleasant Surprise!

Tax residency in Germany

Germany is an attractive place to live in the center of Europe and the EU. It is safe, relaxed and highly developed. Its political system is stable and reliable, while its powerful economy is the largest in Europe. Known for its long and rich cultural history, Germany offers a very high standard of living. All these reasons make Germany a favorite destination for foreigners from inside and outside of the EU.

However, there is no free lunch! Moving to Germany triggers very often some unexpected tax consequences, which everyone should consider carefully before coming to Germany. It is very easy to become tax resident in Germany! However, German tax residency very often does not fit to the individual’s carefully planned tax setting.

Prerequisites for becoming tax resident in Germany pursuant to German domestic law

Pursuant to German domestic law, an individual becomes subject to German resident taxation, if the individual

  • either stays in Germany for more than 6 consecutive months in a year with only minor interruptions (habitual abode or “gewöhnlicher Aufenthalt“), or
  • holds a dwelling in Germany under circumstances indicating that the individual intends to keep and use it (residence or “Wohnsitz“).

Thus, a residence does not require necessarily the actual or regular use of the dwelling. It is sufficient that the individual can use such dwelling whenever the individual wishes to do so. An individual could have different residences in Germany and/or abroad. It is in particular not required that such residence is the individual’s center of vital interest. A tax residency in Germany in particular does not require that the individual is a German citizen.

Consequences of being tax resident in Germany pursuant to German domestic law

An individual’s tax residency in Germany means in particular that such person

  • becomes subject to German income taxation with his/her worldwide income (subject to applicable double taxation treaties) at an income tax rate up to 47.475 % (including solidarity surcharge) depending on the amount of the taxable income;
  • is obligated to file annual income tax returns with the responsible German tax office regarding his/her worldwide income;
  • becomes subject to German exit taxation if he/she has been subject to German resident taxation for at least 10 years and ceases to be tax resident in Germany;
  • becomes subject to German gift taxation as a donor in case of a donation to anybody elsewhere in the world with respect to the donor’s worldwide estate at a gift tax rate between 7 % and 50 % depending on the value of the donation and the degree of relationship between the donor and the donee;
  • becomes subject to German gift taxation as a donee (subject to applicable double taxation treaties) at a gift tax rate between 7 % and 50 % depending on the value of the donation and the degree of relationship between the donor and the donee;
  • is obligated to file gift tax returns with the responsible German tax office in case of a donation to (i) anybody elsewhere in the world with respect to his worldwide estate and (ii) the individual tax resident in Germany irrespective from the fact whether the donated asset is located in Germany;
  • triggers the German inheritance tax liability of the deceased individual’s heir and/or legatee with respect to the deceased individual’s worldwide estate at an inheritance tax rate between 7 % and 50 % depending on the value of the estate and the degree of relationship between the decedent and the heir and/or legatee;
  • triggers the heir’s and/or legatee’s obligation to file inheritance tax returns with the responsible German tax office irrespective from the fact whether (i) the heir and/or the legatee is tax resident in Germany, too, or (ii) the estate is located in Germany;
  • becomes subject to taxation both in Germany and in other countries with respect to the same income or donation subject to applicable double taxation treaties or unilateral law granting tax exemptions or tax credits for mitigating the double taxation;
  • triggers the heir’s/legatee’s taxation with inheritance tax and the donor’s taxation with gift tax in Germany besides other countries with respect to the same estate or donation

Please note that this applies irrespective from the individual’s tax liability in another country according to this country’s domestic law applicable.

Please note that an applicable double taxation treaty might hinder Germany from taxing such individual person fully, but has no impact on this person’s obligation to file its tax returns fully and completely with the German tax authorities. While Germany has agreed upon a large number of double taxation treaties dealing with income taxes, Germany has agreed only on six double taxation treaties dealing with inheritance and gift taxes (United States of America, Switzerland, Denmark, France, Greece and Sweden). Thus, one should not rely on the protection by double taxation treaties only!

Finally, please note that an individual person’s residency in Germany could also result in a foreign company’s resident tax liability in Germany with its worldwide income. This happens if e.g. the individual person’s residence in Germany also qualifies as the company’s place of actual management. This is the case if the individual person acts as an organ representative of a foreign company also from his/her dwelling in Germany.

Worried about Tax Residency in Germany? Prepare in advance.

Before an individual person establishes his/her residency in Germany, the consequences resulting therefrom need to be analyzed in advance very thoroughly for avoiding disadvantageous legal and tax consequences.

An individual could establish such tax residency very easily by acquiring or renting a dwelling or by simply using a dwelling more or less exclusively without having acquired or rented it. For a tax residency in Germany, a German passport or a permit of residence is not required. Thus, a thorough analysis and adaptation of the respective individual’s current tax setting prior to establishing an individual’s tax residency in Germany helps to avoid unpleasant surprises. We are prepared to assist you! https://schmidt-taxlaw.de

We are prepared to assist you!

Michael Schmidt

Michael Schmidt

Schmidt Taxlaw
Succession and Last Will

Succession and Last Will

Succession in Switzerland – Last Will

According to the general provisions of the Swiss International Private Law Act, Swiss courts or administrative authorities at the decedent’s last domicile shall have jurisdiction over probate proceedings and inheritance disputes. The jurisdiction of a state who claims exclusive jurisdiction over real estate within its territory remains reserved. The estate of a person with his or her last domicile in Switzerland will in principle be subject to Swiss law.

Order of succession in Switzerland

The Swiss Civil Code determines the order of succession. The closest heirs of a decedent are the descendants. As a rule, the children shall inherit in equal parts; adoptive children have the legal status of natural children. Their own issue takes the position of predeceased children.

In case the decedent does not leave any children, the inheritance shall devolve to the issue of the parents. Their descendants in all degrees per stirpes shall substitute a predeceased mother or father. The surviving spouse or registered partner is legal heir as well.

Swiss law states statutory entitlements for legal heirs (so-called forced heirship portion). Hence, the legal heirs are entitled to a certain percentage of the decedent’s inheritance. This percentage depends on whom the legal heirs have to share with in the estate.

Last will

In order to arrange for a succession different from the intestate succession, a last will or inheritance contract may be drawn up. Nevertheless, a last will, just as an inheritance contract, will have to comply with the statutory entitlements of the legal heirs. According to Swiss law, a last will shall be valid as regards its form if it is drawn up in the form of a public deed or in holographic form.

A foreigner may, be it by last will or inheritance contract, subject his or her estate to the laws of his or her home country (professio iuris). Such disposition shall, however, become null and void if, at the time of death, the decedent was no longer a national of that state or if in the meantime he or she had become a Swiss national.

The Hague Convention on the Conflicts of Laws relating to the Form of Testamentary Dispositions will shall govern the form of a last will. Therefore, a testamentary disposition shall be valid from a formal point of view, if its form complies with the international law:

  1. of the place where the testator has drawn it up;
  2. of a nationality possessed by the testator, either at the time he made the disposition or at the time of his death
  3. of a place in which the testator had his domicile either at the time when he made the disposition, or at the time of his death
  4. of the place in which the testator had his habitual residence either at the time when he made the disposition, or at the time of his death
  5. as far as immovables are concerned, of the place where they are located. https://www.linkedin.com/in/walter-h-boss-b9810610/
joint bank account

Walter H. Boss

Walter Boss

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Discriminatory inheritance and gift tax regime for non-residents in Spain?

Discriminatory inheritance and gift tax regime for non-residents in Spain?

Under Spanish regulations, mortis causa transfers and inter vivos gifts are subject to inheritance and gift tax (“IGT”). Spanish resident individuals are subject to IGT on their worldwide assets acquired, while non-residents are subject to this tax exclusively on their assets in Spain or rights that may be exercised in Spain.

What you need to know about inheritance and gift taxes in Spain

The taxable base of the recipients (heirs, legatees and donees) is the net value of the assets received. Burdens and encumbrances imposed directly on the assets, which effectively reduce their value or capital (such as pensions and annuities), duly documented debts (mortgages, pledges, local taxes) and specific expenditures (including medical costs and burial expenses) would be deductible.

IGT in Spain is regulated by the state and the autonomous regions. Act 22/2009 establishes the mechanism to determine whether state or autonomous region legislation applies in each case. Generally, the legislation of autonomous regions is more favorable to the taxpayer, as it usually establishes a higher allowance applicable to close relatives.

In relation to mortis causa transfers, the applicable law will be the law of the autonomous region where the deceased had his habitual residence at the time of death. If the deceased was not a tax resident in Spain, state legislation would apply.

While there are few tax reductions under state regulations, autonomous regions usually have high allowances. For example, in the autonomous region of Madrid, there is a 99% allowance on mortis causa transfers between parents and children. Thus, if the deceased had his habitual residence in Madrid, tax-resident heirs would only pay IGT of 1%, while non-resident heirs would pay the full amount of IGT for the same assets received.

Regarding inter vivos gifts, the applicable legislation depends on the beneficiary’s tax residence. If the donee is a resident in Spain, the legislation of the autonomous region where the donee has his habitual residence [For this purpose, anti-fraud provisions consider that donees’ tax residence is where they had their habitual residence in Spain for most of the time within a five-year period.]  will prevail. However, a specific rule applies if the assets transferred consist of real estate located in Spain. In this case, the applicable law would be that of the autonomous region where the real estate is located, but if the real estate is located abroad, Spanish state law would apply. Likewise, if the donee is not a resident in Spain, state law would apply (regardless of the nature of the Spanish assets or rights donated).

Tax rates

Under Spanish state law (applicable when the deceased is a non-resident or when the heirs or beneficiaries are non-residents in Spain), the applicable tax rates for determining the final tax liability for IGT are progressive, ranging from 7.65% to 34% (in cases where the taxable base exceeds €797,555.08).https://www.cuatrecasas.com/en/global/