04.07.2017 | KPMG Law Insights

Criminal tax law – transfers of assets between spouses can trigger gift tax

Increased seizures of property transfers between spouses by financial and law enforcement authorities

Transfers of assets between spouses may trigger gift tax

Transfers of assets between spouses are increasingly the subject of disputes under tax procedural law and criminal tax law.

In principle, an acquisition subject to gift tax must be reported by both the donor and the donee to the competent tax office within a period of three months. If this obligation is not fulfilled and gift tax would have had to be assessed, the persons concerned are increasingly confronted with criminal charges.

In addition, the Federal Fiscal Court (Bundesfinanzhof, BFH) has already had the opportunity to address the issue of gift tax in the case of transfers of assets between spouses. However, case law is inconsistent, depending on the underlying case type.

The following is a brief overview of the case law and certain case constellations that typically arise in practice.

1. individual account/deposit

In its ruling of June 29, 2016 (II R 41/14), the Federal Fiscal Court (Bundesfinanzhof, BFH) decided that a gift between spouses is subject to gift tax if one spouse transfers the asset status
of his individual account or custody account to an individual account or custody account of the other spouse. If the spouse subject to gift tax invokes this,
that the asset was already attributable to him before the transfer and that he was therefore not enriched in this respect, he shall bear the burden of proof in this respect. This means that in the event of a transfer of assets from or to individual accounts and custody accounts, the spouses must, as a matter of principle, prove the circumstances that militate against a gift subject to gift tax. If this proof cannot be provided, gift tax will be assessed.

2. joint account/deposit

In contrast, a ruling of the BFH of 23 November 2011 (II R 33/10) concerned joint accounts or joint custody accounts of spouses (so-called “or accounts”). The Federal Fiscal Court (Bundesfinanzhof, BFH) has ruled in this regard that it cannot be assumed that a gift is subject to gift tax simply because only one spouse has paid into a joint account of both spouses.
Spouses assets paid in. The tax office had to prove the facts giving rise to the tax, i.e. that both spouses participated equally in the account balance.

It follows from this that in the case of joint accounts and deposits of spouses, the burden of proof generally lies with the tax office.

Nevertheless, there are also conceivable case constellations in which the tax office can provide this evidence or the indications speak for a transfer of assets and thus gift tax can be triggered. This applies in particular in the following cases:

– One spouse pays in assets that the other spouse consumes.
– Both spouses pay in assets, which only one of the spouses uses.
– One spouse pays in assets that both spouses consume.

3. power of attorney for account

Often, one spouse has an account power of attorney for the other spouse’s account. Such a power of attorney changes the allocation without the occurrence of further circumstances.
of the bank’s assets nothing. The bank power of attorney enables the authorized representative to act vis-à-vis the bank in the external relationship, but does not allow any conclusions to be drawn about the internal relationship and therefore generally has no effect on the allocation of the assets for gift tax purposes.

4. trust relationship

There are cases where the sole account holder is a trustee for a trustor. In such cases, the assets are not only attributable to the settlor for tax purposes, but also belong to him under civil law. If the trustee returns the assets (trust property) to the settlor, there is no gift. However, in fiduciary relationships lies
the burden of proof regularly lies with the party invoking the fiduciary relationship (Sec. 159 AO). If this proof cannot be provided, the tax authorities may assume that a gift has been made. These cases largely correspond to the cases described in para. 1 (individual account/deposit).

5. loans/insurance

The above principles can also be applied to other asset areas, such as loans and insurance.

If, for example, one spouse pays the loan installment for a loan of the other spouse, then without the addition of further circumstances a free gift, i.e. a gift of the loan installments (interest and repayment portion), will have to be assumed. However, if the loan is for the family home, an argument can be made,
that a tax-exempt indirect gift of the family home has been made (Sec. 13 (1) No. 4a ErbStG).

A gift may also exist if one spouse pays the premiums of an insurance policy for which the other spouse is the policyholder. Often
However, it must be examined here whether these are already non-taxable benefits within the framework of the statutory maintenance obligation (§ 1353 BGB) or tax-exempt maintenance payments in accordance with § 1353 BGB. § 13 para. 1 No. 12 Inheritance Tax Act.

In addition, in the case of insurance policies, the question also arises as to when a pecuniary benefit is obtained from an insurance policy and at what point in time the permissive
gift, i.e. a donation, has been made. In the case of life insurance policies, for example, the benefit is not obtained by the beneficiary until the time of the insured person’s death and is only then considered an acquisition upon death.

6. salary payments, bonuses and bonus payments

If salary payments, bonuses and royalty payments for one spouse are paid into a joint account of the spouses, the following offers itself in practice
Differentiation on:

Salary payments to a joint account are generally not relevant for gift tax purposes. To the extent that the non-salaried spouse has this money at his or her disposal, it is generally enrichment that qualifies as a non-taxable alimony award. In principle, this is not a gift, but a benefit that is owed as part of the marital maintenance obligation (§ 1353 of the German Civil Code).

Bonuses and bonus payments may be paid into a joint account/deposit of the spouses in accordance with the provisions set forth in sec. 2 principles mentioned above. If the tax authorities claim that the spouse who does not receive the bonus or bonus is enriched free of charge, the tax authorities shall bear the burden of proof for the existence of a gift.

7. tax refunds

Income tax refunds and payments are also made the subject of tax procedural disputes.

This case may become relevant in particular if both spouses earn their own income and are assessed individually and the tax liability of both spouses is (only) settled by one spouse.

The same may apply if a tax refund concerning both spouses is (only) transferred to an (individual) account of one spouse.

8. recommendations for practice

Written documentation of what is intended (“clarification agreement”) prior to execution of the relevant transactions is generally recommended. I.d.R.
this is sufficient to satisfy a required burden of proof. In individual cases, unwanted gifts can be prevented by certain measures, such as the so-called “Güterstandsschaukel” (property regime swing)
(termination of the community of accrued gains with offsetting of gratuitous gifts against the accrued gains to be offset) can be eliminated retroactively.

If it subsequently becomes known that gratuitous gifts constitute taxable gifts or if there are doubts about this, they can be disclosed to the tax authorities in accordance with the general principles.

Any relevance for gift tax purposes depends on the amount of the gift and the gift tax allowances still available.

The experts in our practice group will be happy to advise you.

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Günter Graeber

Senior Manager

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Dr. Heiko Hoffmann

Munich Site Manager
Head of Criminal Tax Law

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Dr. Jochen Maier

Senior Manager

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Arndt Rodatz

Head of Criminal Tax Law

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