Will a gift to a child in the Netherlands create a tax headache for us?

Q&A: Dominic Coyle

Inheritance and gift tax is one of those things that can vary quite substantially from country to country, even in the EU. Photograph: Getty Images

Inheritance and gift tax is one of those things that can vary quite substantially from country to country, even in the EU. Photograph: Getty Images

 

I have an adult child living and working in the Netherlands. I want to help them financially in their proposed purchase of an apartment to the tune of something in the region of €10,000 to €25,000.

I understand that in the Netherlands a person can receive a gift of €100,000 without tax implications if it is for the purchase or renovation of a residential property. Are there any tax implications for them or myself here?

Are there any issues in transferring this amount of money to an account abroad?

Mr L.G., email

Inheritance and gift tax is one of those things that can vary quite substantially from country to country, even in the European Union. In some it is the estate that is taxed, in others it is the beneficiary. In the Netherlands, funnily, it is the recipient that is taxed, but on the basis of where the person making the gift or bequest is resident.

If they are resident in the Netherlands the Dutch will assume the tax must be paid in the Netherlands regardless of where the recipient lives. Similarly, even if a Dutch citizen leaves the Netherlands any gift or inheritance from them over the next 10 years is deemed liable to Dutch law.

Now there is provision in Europe for a Dutch resident who is a citizen of another country to choose where their estate should be taxed, but they must state that preference expressly in writing. Otherwise the default kicks in.

For what it’s worth, such an option does not apply in Ireland (or Britain and, I believe, Denmark) as we all opted out of the EU measure when it came in a number of years ago.

The rate of tax you will pay on a Dutch inheritance (or gift) depends on your relationship with the donor and how much you receive. They vary from as little as 10 per cent to modest bequests from a parent to 40 per cent on substantial gifts or bequests from siblings or people not directly related to you.

There are exemptions as in Ireland, but, again, there are important differences. A child can inherit just under €21,000 from a parent before tax kicks in.

On a gift from a parent the first €5,515 in any year is exempt: from anyone else the limit is €2,208.

However, there are further one-off exemptions on gifts from parents. In general, this “lifetime limit” for an adult child is €26,457. That rises to €55,114 if the gift is made to fund studies and even further to €103,643 if it is made to buy, maintain or improve a home (including repayment of a mortgage).

That’s where your €100,000 comes in.

But the issue here is that you are not in the Netherlands but here in Ireland. And that is a whole different proposition. Dutch gift tax affects only gifts from people who are resident in the Netherlands (or recently emigrated).

As Irish citizens and residents, the Dutch limit on gifts does not appear to apply to you. And nor, as best as I understand, does Irish law in this circumstance. In Ireland it is the recipient who is tax liable, but if your child is tax resident in the Netherlands they would not be liable to Irish tax on a cash gift like this.

So there appears to be no tax impediment to stop you sending your gift of up to €25,000 to your child. In fairness, even if Dutch law did apply there would be no tax liability on either side.

And, finally, for peace of mind there is no other issue preventing you transferring this amount to a Dutch account.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

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