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There are rules for how large an amount you can give to your loved ones each year. As 2022 is drawing to a close, it may be that the last families have to consider whether a gift for their loved ones should be reached this year.
According to the law, you must give a gift to your loved ones every year. It is a requirement that there is actually a transfer of an asset, but it is not a requirement that the gift is cash. The gift can also be an asset, such as a painting or a car. The gift just needs to be able to be valued.
To whom can I give a gift and how much can I give?
Here is an overview of who you can give gifts to and how much you can give according to the rates for 2022:
Spouse: No tax or duties must be paid on gifts between spouses, regardless of the value of the gift
Children, grandchildren, parents and grandparents: DKK 69,500.
Unmarried cohabitants, if you have lived together for over 2 years: DKK 69,500.
Children-in-law: DKK 24,300.
In 2023, the amounts will rise to DKK 71,500 for children, grandchildren, parents, grandparents and unmarried cohabitants, while children-in-law may be given DKK 25,000.
Persons who do not appear on the above list – for example siblings, nieces and nephews – may not be given a tax-free gift. Here, you must instead state the gift on your tax return, as the gift is subject to income tax. The amount limit applies per person, which means that a parent couple can in 2022 give a child DKK 139,000 in total.
Please note that it is always a good idea to create a gift certificate when giving a gift of high value. The deed of gift ensures that it is actually a gift, should SKAT question the gift. In this way, neither the giver nor the recipient risks having to pay gift tax, even if the value of the gift is below the current maximum limit for tax-free gifts.
What if I want to give a larger gift?
If you want to give a gift that is greater than the annual limit for tax-free gifts, you can make use of the family loan. With a family loan, a promissory note is created between the gift giver and gift recipient, where the gift recipient actually owes the gift giver money. The gift giver then has the opportunity to reduce the loan continuously each year with the annual tax-free gift amount.
A family loan has the advantage that you can give a large gift at once. This is practical if, for example, the gift recipient has to use the amount on the payment for a house or the like.
Example of tax-free gift via family loan:
In 2022, you would like to give your child DKK 300,000 as a gift.
You give your child DKK 69,500 as a gift, and at the same time create a family loan of DKK 230,500. The amounts are deposited into your child’s account in two installments.
The loan is reduced in 2023 by DKK 71,500, which is the maximum tax-free amount for the year. The remaining debt is now only DKK 159,000.
In subsequent years, the loan is reduced again by the annual tax-free amount until the loan is paid.
In this example, the family loan will be settled in 5 years. If you had not set up the family loan, but simply transferred DKK 300,000 as a gift, then 15% tax on DKK 230,500 would have to be paid.
When should I hand over the gift?
The gift must be handed over in the year in which you want the gift to be given. So you must not wait until 2023 to give your child DKK 141,000 as a gift for both 2023 and 2022. SKAT considers it as if you have given your child one gift in 2023, and tax of 15% of the amount over DKK 71,500 must therefore be paid.
By associate attorney Mette Tarp Pedersen
There are rules for how large an amount you can give to your loved ones each year. As 2022 is drawing to a close, it may be that the last families have to consider whether a gift for their loved ones should be reached this year.
According to the law, you must give a gift to your loved ones every year. It is a requirement that there is actually a transfer of an asset, but it is not a requirement that the gift is cash. The gift can also be an asset, such as a painting or a car. The gift just needs to be able to be valued.
To whom can I give a gift and how much can I give?
Here is an overview of who you can give gifts to and how much you can give according to the rates for 2022:
Spouse: No tax or duties must be paid on gifts between spouses, regardless of the value of the gift
Children, grandchildren, parents and grandparents: DKK 69,500.
Unmarried cohabitants, if you have lived together for over 2 years: DKK 69,500.
Children-in-law: DKK 24,300.
In 2023, the amounts will rise to DKK 71,500 for children, grandchildren, parents, grandparents and unmarried cohabitants, while children-in-law may be given DKK 25,000.
Persons who do not appear on the above list – for example siblings, nieces and nephews – may not be given a tax-free gift. Here, you must instead state the gift on your tax return, as the gift is subject to income tax. The amount limit applies per person, which means that a parent couple can in 2022 give a child DKK 139,000 in total.
Please note that it is always a good idea to create a gift certificate when giving a gift of high value. The deed of gift ensures that it is actually a gift, should SKAT question the gift. In this way, neither the giver nor the recipient risks having to pay gift tax, even if the value of the gift is below the current maximum limit for tax-free gifts.
What if I want to give a larger gift?
If you want to give a gift that is greater than the annual limit for tax-free gifts, you can make use of the family loan. With a family loan, a promissory note is created between the gift giver and gift recipient, where the gift recipient actually owes the gift giver money. The gift giver then has the opportunity to reduce the loan continuously each year with the annual tax-free gift amount.
A family loan has the advantage that you can give a large gift at once. This is practical if, for example, the gift recipient has to use the amount on the payment for a house or the like.
Example of tax-free gift via family loan:
In 2022, you would like to give your child DKK 300,000 as a gift.
You give your child DKK 69,500 as a gift, and at the same time create a family loan of DKK 230,500. The amounts are deposited into your child’s account in two installments.
The loan is reduced in 2023 by DKK 71,500, which is the maximum tax-free amount for the year. The remaining debt is now only DKK 159,000.
In subsequent years, the loan is reduced again by the annual tax-free amount until the loan is paid.
In this example, the family loan will be settled in 5 years. If you had not set up the family loan, but simply transferred DKK 300,000 as a gift, then 15% tax on DKK 230,500 would have to be paid.
When should I hand over the gift?
The gift must be handed over in the year in which you want the gift to be given. So you must not wait until 2023 to give your child DKK 141,000 as a gift for both 2023 and 2022. SKAT considers it as if you have given your child one gift in 2023, and tax of 15% of the amount over DKK 71,500 must therefore be paid.
By associate attorney Mette Tarp Pedersen
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