Gift Tax
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In economics, a gift tax is the tax on money or property that one living person or corporate entity gives to another. A gift tax is a type of transfer tax that is imposed when someone gives something of value to someone else. The transfer must be gratuitous or the receiving party must pay a lesser amount than the item's full value to be considered a gift. Items received upon the death of another are considered separately under the
inheritance tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died. International tax law distinguishes between an es ...
. Many
gifts A gift or a present is an item given to someone without the expectation of payment or anything in return. An item is not a gift if that item is already owned by the one to whom it is given. Although gift-giving might involve an expectation ...
are not subject to taxation because of exemptions given in
tax law Tax law or revenue law is an area of legal study in which public or sanctioned authorities, such as federal, state and municipal governments (as in the case of the US) use a body of rules and procedures (laws) to assess and collect taxes in a ...
s. The gift tax amount varies by jurisdiction, and international comparison of rates is complex and fluid. The process of transferring assets and wealth to the upcoming generations is known as estate planning. It involves planning for transfers at death or during life. One such instrument is the right to transfer assets to another person known as gift-giving, or with the goal of reducing one's taxable wealth when the donor still lives. For fulfilling the criteria of a gift, the person who receives the gift cannot pay the giver the full value for that gift, but they may pay an amount less than the full value of the gift. In the situation where all exclusions, thresholds, and exemptions have been met, these kinds of transfers are subject to a gift tax. There are some criteria for a valid gift to be satisfied: the intention of the donor should be to voluntarily transfer and he is also competent to do so. On the receiver side, the donee should be able to receive and take delivery, and the person who provides the gift would be ready to give up all the control over the given property.


Types

Once a transfer to be labeled as a gift is determined, the next part is to determine if the gift tax will apply to that transfer. There are several types of gifts. To differentiate between complete and incomplete gift, the example of trust can be important as in the incomplete form, the donor retains control over a gift in terms of placing the money into a revocable trust and as such, keep the right to control the final disposition of what is in that trust, while in the case of an irrevocable trust, they make a complete gift by giving up control completely. In a direct case, the gift is directly transferred to the recipient for example in terms of property or payment. In an indirect case, a transfer on behalf of someone for someone's benefit is taking place like payment of loan or credit on behalf of relatives. In the case of a net gift, the recipient is responsible for the gift tax, while in most other cases the donor is responsible. Revisionary interest gift can be explained in a way where transfers are done to the recipient which will revert to the donor. The donor places money in a trust for a time period for the benefit of the recipient. The donor will be reverted the money at the end of the term.  The present value is the worth to the recipient rather than fair market value. The value of the gift in this instance is less than the value of the property.


Valuation

There are several ways for the valuation of gift tax. For a bond, it would be the present value of its future payments. The average of the low and high share price for the day on which gift transfer has taken place is the value of publicly traded shares. For privately held shares the opinion of a qualified valuation specialist would be required while taking into account the potential restrictions on control, liquidity, and marketability. The United States Treasury has issued guidelines for certain property types. It would make more sense to the donor to gift appreciated assets since they would remove a larger sum from their estate. The totality of one's tax planning and consulting professional is to be considered. It is however to be considered that fair market value on the date of its transfer is taken into consideration for gift tax purposes. An appraisal is needed for real estate and collectibles.


Exemptions

There are exemptions from having to pay gift tax. For example, gifts up to a certain value per year per recipient are subject to the annual exclusion. In the United States for example the amount is $15,000. Not eligible for the annual exclusion are the gifts that allow the recipient unrestrained access only at a later date or a future interest and these are fully taxable. There is a technique known as Crummey power that enables a gift that is not eligible for a tax exclusion and enables individuals to receive it as the gift that is tax eligible. It is applied by Individuals often to contributions in an irrevocable trust. In order for it to work, an individual must specify that the gift amount does not exceed $15,000 annually, per beneficiary and is part of the trust when it is drafted. Payments as a means for support can be exempt from gift tax in the case of payments for room and board or higher education that is a legal obligation for children or other dependents. Payments made directly to a qualified medical care provider or academic institution on behalf of the donee are exempt from any gift tax as qualified transfers. Gifts and transfers made to political organizations are also exempt. These are defined as those advocating the nomination, selection, or appointment of any individual to state, federal, or local public office. Typically deemed compensation are transfers in a business setting. Gifts like those to commemorate one's retirement of service or reward years of service are not subject to the gift tax. Transfers between spouses are exempt from gift tax in the US if the donee spouse is a U.S. citizen. Otherwise, there is a limit on the tax-exempt transfer. Gifts for use by the political organization to these organizations are excluded. And as long as the recipient is a state, federal or local government for public use, fraternal or veterans organization, corporation for educational, charitable or scientific, or religious purposes. Educational and medical expenses payments made by a donor to a person or an organization, such as a doctor, a college, or a hospital are also excluded. When determining if one owes gift tax, it is necessary to determine what gifts were given for the year, whether or not the gifts are exempt from gift tax or fall into exception categories of the annual exclusion amount, and to what degree they may be offset by the unified credit amount for the given year. Above all, a tax professional should be consulted when undertaking tax planning decisions. A gift tax return should be filed if the gifts transferred are of future interest or exceed the annual exclusion, or exceed the unified credit amount.


Gift tax by country


United States


Countries without gift tax

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Argentina Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country in the southern half of South America. Argentina covers an area of , making it the second-largest country in South America after Brazil, th ...
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Australia Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
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Austria Austria, , bar, Östareich officially the Republic of Austria, is a country in the southern part of Central Europe, lying in the Eastern Alps. It is a federation of nine states, one of which is the capital, Vienna, the most populous ...
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Canada Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
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Cyprus Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is geo ...
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New Zealand New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...
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Norway Norway, officially the Kingdom of Norway, is a Nordic country in Northern Europe, the mainland territory of which comprises the western and northernmost portion of the Scandinavian Peninsula. The remote Arctic island of Jan Mayen and t ...
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Slovakia Slovakia (; sk, Slovensko ), officially the Slovak Republic ( sk, Slovenská republika, links=no ), is a landlocked country in Central Europe. It is bordered by Poland to the north, Ukraine to the east, Hungary to the south, Austria to the s ...
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Sweden Sweden, formally the Kingdom of Sweden,The United Nations Group of Experts on Geographical Names states that the country's formal name is the Kingdom of SwedenUNGEGN World Geographical Names, Sweden./ref> is a Nordic country located on ...
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Liechtenstein Liechtenstein (), officially the Principality of Liechtenstein (german: link=no, Fürstentum Liechtenstein), is a German-speaking microstate located in the Alps between Austria and Switzerland. Liechtenstein is a semi-constitutional monarchy ...


Countries with gift tax

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Belgium Belgium, ; french: Belgique ; german: Belgien officially the Kingdom of Belgium, is a country in Northwestern Europe. The country is bordered by the Netherlands to the north, Germany to the east, Luxembourg to the southeast, France to th ...
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Chile Chile, officially the Republic of Chile, is a country in the western part of South America. It is the southernmost country in the world, and the closest to Antarctica, occupying a long and narrow strip of land between the Andes to the east a ...
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Czech Republic The Czech Republic, or simply Czechia, is a landlocked country in Central Europe. Historically known as Bohemia, it is bordered by Austria to the south, Germany to the west, Poland to the northeast, and Slovakia to the southeast. The ...
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Denmark ) , song = ( en, "King Christian stood by the lofty mast") , song_type = National and royal anthem , image_map = EU-Denmark.svg , map_caption = , subdivision_type = Sovereign state , subdivision_name = Danish Realm, Kingdom of Denmark ...
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Finland Finland ( fi, Suomi ; sv, Finland ), officially the Republic of Finland (; ), is a Nordic country in Northern Europe. It shares land borders with Sweden to the northwest, Norway to the north, and Russia to the east, with the Gulf of B ...
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France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
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Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
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India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
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Ireland Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic Ocean, in Northwestern Europe, north-western Europe. It is separated from Great Britain to its east by the North Channel (Grea ...
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Italy Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical re ...
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Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...
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Netherlands ) , anthem = ( en, "William of Nassau") , image_map = , map_caption = , subdivision_type = Sovereign state , subdivision_name = Kingdom of the Netherlands , established_title = Before independence , established_date = Spanish Netherl ...
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Philippines The Philippines (; fil, Pilipinas, links=no), officially the Republic of the Philippines ( fil, Republika ng Pilipinas, links=no), * bik, Republika kan Filipinas * ceb, Republika sa Pilipinas * cbk, República de Filipinas * hil, Republ ...
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Portugal Portugal, officially the Portuguese Republic ( pt, República Portuguesa, links=yes ), is a country whose mainland is located on the Iberian Peninsula of Southwestern Europe, and whose territory also includes the Atlantic archipelagos of ...
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Poland Poland, officially the Republic of Poland, is a country in Central Europe. It is divided into 16 administrative provinces called voivodeships, covering an area of . Poland has a population of over 38 million and is the fifth-most populous ...
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Slovenia Slovenia ( ; sl, Slovenija ), officially the Republic of Slovenia (Slovene: , abbr.: ''RS''), is a country in Central Europe. It is bordered by Italy to the west, Austria to the north, Hungary to the northeast, Croatia to the southeast, an ...
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Spain , image_flag = Bandera de España.svg , image_coat = Escudo de España (mazonado).svg , national_motto = ''Plus ultra'' (Latin)(English: "Further Beyond") , national_anthem = (English: "Royal March") , i ...
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South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
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South Korea South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
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Switzerland ). Swiss law does not designate a ''capital'' as such, but the federal parliament and government are installed in Bern, while other federal institutions, such as the federal courts, are in other cities (Bellinzona, Lausanne, Luzern, Neuchâtel ...
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United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
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United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...


Gift tax rates in the world

The table contains only information on countries that publicly provided information on gift tax.


References

{{Authority control Transfer tax