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FINANCE LAW FOR 2006
– provisions concerning gift and inheritance tax
The
Finance Law for 2006 has introduced a number of reforms in relation to
gift and inheritance tax with the principal objective of reducing these
taxes, particularly in order to encourage recourse to lifetime gifts.
The principal reforms can be summarised as follows:
1) Increase in the tax free band upon gifts and inheritance
between brothers and sisters
The
general tax free band upon gifts and inheritance between brothers and
sisters has been increased to 5,000.00 Euros (previously 1,500.00
Euros). It cannot be cumulated with the special tax free band of 57,000
Euros which applies to certain specific inheritances between siblings,
but it can be cumulated with the special tax free band for handicapped
beneficiaries.
2) New tax free band applicable to gifts to the donor’s
nieces and nephews
A new
tax free band of 5,000.00 Euros has been introduced which applies
to gifts made to nieces and nephews, though only to those nieces and
nephews issue of the donor’s brothers and sisters rather than to nieces
and nephews by marriage. The tax free band applies to each particular
gift, meaning that a same person can benefit from it more than once
should gifts be made by more than one aunt or uncle, and even should the
aunt or uncle have children of her or his own. This tax free band does
not apply to an inheritance, where the tax free band remains 1,500
Euros.
3) New tax free band applicable to gifts to
great-grandchildren
A new
tax free band of 5,000.00 Euros has been introduced which applies
to gifts made to a great-grandchild by a great-grandparent.
4) Reduction of the time period beyond which a gift or
inheritance will benefit from the tax free band anew
The
time period beyond which a gift or inheritance will benefit from the tax
free band anew has been reduced from 10 years to 6 years. This
means that if a gift has been made and tax levied more than 6 years ago,
a further gift or an inheritance will benefit again from the tax free
band. This provision is immediately applicable and means that the
reduced 6 year period will apply to gifts made between 1st
January 2000 and 31st January 2005. In order that this rule
can be applied, the gifts must have been declared spontaneously to the
tax office if they are not in authentic form (i.e. in an act recorded in
front of a notaire).
5)
Increase in donor age limits to benefit from
reductions in gift tax
The
temporary reduction in gift tax of 50% regardless of the age of the
donor, applicable until 31st December 2005, has not been
extended. However, under the general provisions reducing gift tax on
the basis of the age of the donor, the age limit for certain reductions
of the gift tax has been extended. The tax reduction measures
applicable to gifts are now as follows:
|
Donor’s age |
Gifts
of full ownership |
Gifts
of basic property right (excluding usufruct) or with reserve of
a right to use and live in property |
Gift
of usufruct |
|
Below 70 |
50% |
35% |
50% |
|
Between
70 and 80 |
30% |
10% |
30% |
|
80 and
above |
0% |
0% |
0% |
6) Perpetuation of exoneration from tax relating to certain
acts of change of matrimonial regime
The
temporary exoneration from tax upon certain acts of change of
matrimonial regime has been perpetuated. The measure only applies to
changes of matrimonial regime entered into in view of adopting a
‘community’ regime. The exoneration concerns the fixed tax of 125 €,
the publication tax of 0.6% and the ‘frais d’assiette et de recouvrement’.
However, the land registrar’s salary remains payable.
7) Reduction in the interest rate for late tax payments and
alignment with refunds due from the tax office
The
rate of interest due upon late tax payments has been reduced to 0.4% per
month (4.8% per annum). The interest due upon sums refunded by the tax
office to tax payers has been aligned with this rate.
These
amendments apply to gifts and/or inheritances made or open from 1st
January 2006.
A
further legal update will follow shortly dealing with other items of
interest introduced by the 2006 Finance Law.
10/01/2006
- Legal
update
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