'Gift Tax in Germany: Tax-Free Allowance, Rates, and Notification to the

Schenkungsteuer — the German gift tax. It may apply when a person receives money, real estate, a business share, securities, or other property benefits without consideration. The tax is not levied on every gift: first, a personal tax-free allowance (Freibetrag) is applied, and only the amount exceeding that is taxed at the rates specified in the ErbStG.

For everyday gifts such as flowers, small items, or typical holiday surprises, this issue is usually not relevant. However, large transfers, financial assistance for purchasing a home, transferring an apartment to children, debt forgiveness, or the sale of property at a price significantly below market value should be checked in advance to determine whether they constitute a potential gift.

When a Gift Becomes a Tax Issue

For the tax office (Finanzamt), it’s not just a contract titled “Schenkung” that matters. A tax risk arises whenever one person receives an economic benefit without providing equivalent consideration.

Typical situations:

Parents transfer a large sum to their child at to purchase an apartment.
An owner transfers an apartment, house, or plot of land to a relative.
Property is sold at a “family price” significantly below market value: the difference may be considered a mixed gift.
A loan between relatives is forgiven in full or in part.
A loan is granted interest-free or on terms that are clearly below market rates, and the recipient receives an economic benefit.
Shares in a GmbH, securities, shares in an estate, or other assets are being transferred.

The key question is not whether the parties referred to the transaction as a gift, but whether the recipient received a financial benefit.

Who Pays Gift Tax

The tax is usually calculated for the recipient of the gift. However, under German law, both the donor and the recipient may be held liable to the tax authorities as parties to the transaction; therefore, it is important to clearly specify in the documents who is actually responsible for paying the tax.

If the donor pays the tax on behalf of the recipient, this in itself may increase the tax base. For large amounts, this option should be discussed separately with a tax advisor (Steuerberater) or a tax law specialist (Fachanwalt für Steuerrecht).

Tax-Exempt Amounts for Gifts

The personal tax-free allowance depends on the degree of kinship. It applies to gifts from the same donor to the same recipient over a 10-year period.

Gift Recipient	Tax Class	Exemption Amount
Spouse, registered partner	I	500,000 EUR
Children and Stepchildren	I	400,000 EUR
Grandchildren, if the donor’s child has already died	I	400,000 EUR
Grandchildren, if the donor’s child is alive	I	200,000 EUR
Great-grandchildren	I	100,000 EUR
Parents, Grandparents in Inheritance	I	100,000 EUR
Parents and Grandparents Making Gifts	II	20,000 EUR
Brothers, sisters, nephews, sons-in-law, daughters-in-law, former spouses	II	20,000 EUR
Friends, unmarried partners, distant relatives, and other individuals	III	20,000 EUR

Example: A mother and father can each gift their daughter 400,000 EUR. Since they are two different donors, the tax-free allowance is calculated separately. In total, the daughter can receive 800,000 EUR without gift tax, provided she has not received other gifts from these same parents within the relevant 10-year period.

For unmarried partners, the rule is much stricter: they fall into Class III with an exemption of 20,000 EUR. Therefore, a large transfer of property between life partners often turns out to be significantly more expensive than between spouses.

The 10-Year Rule

The 10-year period is important for gift tax purposes for several reasons.

The tax-free allowance is not updated annually, but rather for each “giver-recipient” pair every 10 years.
All gifts between the same parties during this period are aggregated.
Large transfers of property are often planned in stages: part now, and the next part after the expiration of a new 10-year period.
In the event of inheritance, previous gifts may be included in the estate if they were made within 10 years prior to the donor’s death.

Splitting a gift into annual transfers does not in itself solve the problem. If, over a 10-year period, the total amount from a single donor exceeds the tax-free allowance, the excess may be subject to gift tax.

Gift Tax Rates

After deducting the tax-free allowance (Freibetrag), what remains is the taxable acquisition (steuerpflichtiger Erwerb). The tax rate depends on the tax bracket and the amount involved.

Taxable amount after the tax-free allowance	Class I	Class II	Class III
Up to 75,000 EUR	7%	15%	30%
Up to 300,000 EUR	11%	20%	30%
Up to 600,000 EUR	15%	25%	30%
Up to 6,000,000 EUR	19%	30%	30%
Up to 13,000,000 EUR	23%	35%	50%
Up to 26,000,000 EUR	27%	40%	50%
Over 26,000,000 EUR	30%	43%	50%

The tax rate applies to the taxable amount after deducting the tax-free allowance, not just to the portion within a specific range.

Calculation Examples

A Parent Gives Money to a Child

A father gives his son 650,000 EUR.

Tax-free allowance for a child: 400,000 EUR.
Taxable amount: 650,000 - 400,000 = 250,000 EUR.
For Class I and amounts up to 300,000 EUR, the rate is 11%.
Tax: 250,000 × 11% = 27,500 EUR.

A Grandmother Gives Her Grandson 300,000 EUR

If the grandchild’s parent is alive, the tax-free allowance is usually 200,000 EUR.

Taxable amount: 300,000 - 200,000 = 100,000 EUR.
Class I, range up to 300,000 EUR: 11%.
Tax: 11,000 EUR.

If the grandchild’s parent has already passed away, the tax-free allowance may be higher—400,000 EUR. Therefore, the family situation directly affects the calculation.

A Gift to a Friend

A gift of 100,000 EUR to a friend falls into Class III.

Exemption: 20,000 EUR.
Taxable amount: 80,000 EUR.
Tax rate for Class III: 30%.
Tax: 24,000 EUR.

Gifting Real Estate

The transfer of real estate almost always requires a notary and a separate appraisal. For gift tax purposes, the tax value of the property is important, not just the price the parties specified in the contract.

What is usually checked:

the market value of an apartment, house, or plot of land;
the existence of mortgages and debts assumed by the recipient;
a right of residence or use, such as Nießbrauch or Wohnrecht;
Who will pay for ongoing expenses and taxes;
Have there been any gifts between the same parties in the past 10 years?

If parents gift real estate to their children but retain a right of usufruct (Nießbrauch), the value of that right may reduce the tax value of the gift. The exact calculation depends on the age of the recipient, the value of the property, the type of right, and the valuation according to German rules.

Family Home: When a Home Shared by Spouses May Be Exempt

Special exemptions apply to family homes (Familienheim). In certain cases, the transfer of a home between spouses or registered partners may be exempt from gift tax (Schenkungsteuer) if the conditions of the ErbStG are met.

This is not a universal exemption for all real estate. It is important to determine whether the property is a family home, who lives there, how the transfer is structured, and whether any additional conditions are being violated. Before gifting a house or apartment with the intention of it being classified as a “Familienheim,” it is advisable to obtain an individual tax assessment.

Gifting a Business and Shares in a GmbH

The transfer of a business, shares in a GmbH, or other business assets (Betriebsvermögen) is among the most complex cases. The ErbStG contains special rules for business assets, but these depend on the structure of the assets, the duration of ownership, the amount of salary paid, the composition of administrative assets (Verwaltungsvermögen), and the continued operation of the business.

It is risky to calculate the tax based solely on the general table. Before transferring shares, it is usually necessary to obtain a company valuation, conduct tax modeling, and ensure contractual protection in case the tax exemption is later lost.

Tax Planning Strategies

Chain Gift

A chain of gifts may be legal if each gift is truly independent. For example, a grandmother gives money to her daughter, and the daughter later decides on her own to give money to her child.

Key risk: If the initial agreement explicitly or effectively obligates the intermediate recipient to pass the money on, the tax authorities may view the situation as a direct gift to the final recipient. Therefore, in such arrangements, documentation, actual freedom of disposition, and the absence of automatic transfers are particularly important.

Marital Property Regime Fluctuations

Güterstandsschaukel — a complex arrangement for spouses involving a transition from the community of accrued gains (Zugewinngemeinschaft) to separate property (Gütertrennung) and a possible equalization of accrued gains (Zugewinnausgleich). If properly structured, the equalization of accrued gains may offer tax advantages.

This is not a casual way to “avoid taxes,” but rather a legal and tax transaction involving a notary, a prenuptial agreement, and precise calculations. It requires individual consultation, especially if the marriage was not contracted in Germany, if there is property in multiple countries, or if a prenuptial agreement is already in effect.

How to Report a Gift to the Finanzamt

A gift must generally be reported to the Finanzamt within 3 months after the party to the transaction became aware of the transfer. The reporting obligation may apply to both the donor and the recipient.

The notification is called Anzeige einer Schenkung or Anzeige des Erwerbs. In some cases, a notary or court submits the information itself, for example, in real estate transactions. However, this does not always exempt the parties involved from the need to verify whether the matter has been settled with the tax authorities.

The notification usually specifies:

the donor’s and recipient’s information;
Tax ID or tax number, if available;
addresses and the relevant tax office;
degree of kinship;
the date of the gift;
the nature of the gift and its approximate value;
previous gifts from the same person over the past 10 years;
Who is responsible for paying the tax;
Documents confirming the value and transfer.

Forms and requirements may vary by federal state. It’s generally a good idea to look for a template on the website of your local tax office (Finanzamt) or state tax authority (Landesfinanzverwaltung).

What Happens If You Fail to Report a Gift

If a gift is not declared, the risks depend on the amount, whether tax is due, and the behavior of the parties involved. Possible consequences include additional gift tax assessments, interest, penalties, and—in cases of intentional tax evasion—charges of tax evasion.

If the deadline has already passed, you should not send a brief “retroactive” letter without first verifying the situation. For large sums or cases where tax liability may have arisen, it is best to first discuss the corrective procedure with a tax advisor. In certain situations, an assessment of the requirements for a Selbstanzeige under § 371 AO may be necessary.

Statute of Limitations

In Germany, the statute of limitations for taxes depends on whether the transaction was reported and whether any error was made in good faith or with intent to conceal. Regarding gift tax (Schenkungsteuer), there is an additional practical nuance: the statute of limitations may not begin on the date of the gift itself, but rather from the moment the tax authorities received sufficient information about the gift.

Therefore, old, undeclared gifts should not automatically be considered “forgotten.” This applies in particular to real estate, large transfers, foreign assets, and gifts that come to light during inheritance proceedings.

Checklist Before Making a Large Gift

Identify the donor and the recipient: The tax-free allowance applies to a specific pair of individuals.
Check the tax class and limit under § 16 of the ErbStG.
Gather information about gifts exchanged between the same parties over the past 10 years.
Valuate the asset: cash is straightforward, but real estate and businesses require separate calculations.
Decide who pays the tax and how this is reflected in the contract.
Check whether a notary is required.
Prepare a notification for the Finanzamt.
For cross-border gifts, check the recipient’s tax residency, the location of the property, and possible taxation in another country.

FAQ

Do you need to report a gift if no tax is definitely due?

Formally, a reporting obligation may exist even when the tax amount is zero after the tax-free allowance. In practice, much depends on the type of gift and whether the tax office receives information from a notary or another authority. For large sums, it is safer to notify the tax office or clarify the procedure in writing.

Are gifts received before moving to Germany taken into account?

These may be relevant if Germany has the right to tax the gift and the gifts are between the same parties within a 10-year period. For international cases, the tax residency of the donor and recipient, the location of the property, and applicable treaties must be checked separately.

Is it possible to gift an apartment to a child in installments?

Yes, but every transfer must be properly documented, including an appraisal of the share, notarization, and consideration of the 10-year period. Sometimes a joint gift allows multiple donors to utilize their tax-free allowances, but the arrangement must correspond to the actual ownership and documentation.

Are gifts between spouses subject to tax?

Spouses and registered partners have a tax-free allowance of 500,000 EUR. If a gift exceeds this limit or does not qualify for a special exemption, gift tax may apply even between spouses.

Where can you find the forms?

Look for the “Erbschaftsteuer/Schenkungsteuer” section on the Finanzamt website or the tax administration website of your federal state. For example, North Rhine-Westphalia (NRW) has a separate section with forms for inheritance and gift tax.