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How to Give Money to Siblings Without Tax Risks

In the current context, many individuals want to financially support their family members, raising doubts about the tax implications of such gestures. For instance, a sister may wish to transfer money to her brother’s account to assist him during a financial crisis, or a brother may want to help his sister pay off a car loan by gifting her a significant sum of money. These scenarios raise important questions regarding the taxation of donations between siblings, which deserve careful examination.

Let’s understand how to gift money between siblings without triggering tax concerns and without the need for a notarial deed.

Legitimacy of Donation and Form

In Italy, donating money between siblings is entirely legal and regulated, like all other donations, by Articles 769, 782, and 783 of the Civil Code. These rules establish the valid methods through which a donation can be made.

Generally, a notarial deed is required for donations of “non-negligible value.” However, the absence of a notarial deed renders the donation null, meaning the amount does not become the property of the recipient. Therefore, both the donor and their relatives, such as subsequent heirs, can contest the transfer of money or the gifted asset.

Taxation of Donations Between Siblings

Regarding donations between siblings, the law provides a specific exemption threshold from the donation tax. According to Article 2, paragraph 48, of Legislative Decree 262/2006, donations up to €100,000 are exempt from donation tax. Only the amount exceeding €100,000 is subject to a 6% tax rate.

For instance, if a brother wishes to donate €10,000 to his sister, there are no tax obligations since the amount is well below the established threshold. However, if the sum were €120,000, the tax would apply to the excess over €100,000.

Indirect Donation to Siblings

A different scenario arises when the donation serves a specific purpose, such as paying a bill, a mortgage installment, car repairs, or loan repayment. In these cases, whether the amount is transferred directly to the creditor/seller or to the sibling, it’s considered an indirect donation.

According to jurisprudence, in cases of indirect donations, if the donation tax exceeds €100,000, the parties aren’t required to adhere to a notarial deed or pay the registration tax. However, it’s advisable to specify the donation’s purpose in the transfer’s description to leave a clear record of the transaction’s intent.

Precautions for Transparency

In general, to ensure that the operation is viewed as legitimate by the Revenue Agency, it’s crucial to specify in the bank transfer’s description that the transferred amount is designated as a “donation.” This step not only serves as a formality but also clarifies the parties’ intent and prevents potential misunderstandings during tax audits.

For example, if the brother decides to proceed with the donation, he should make a bank transfer with a description like “Donation for car loan repayment” or a similar statement that unambiguously describes the transaction’s nature.

VGS Lawyers is specialised in family matters. In case you need assistance please contact info@vgslawyers.com
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