The difference between a gift and an endowment (donation) is often questioned. Although these notions might seem semantically very close, they are nonetheless quite different, at least in terms of taxation or even regarding certain civil aspects.
In fact, when a donation is recorded, it is subject to payment of fees varying from 3 to 7% in Brussels and in Flemish Region and from 3.30% to 7.70% in Walloon Region, taking into account the family link between the donor and the beneficiary. Donations that have not been registered are not subject to any taxation provided that the donor does not pass away within 3 years of the donation (this period will probably be extended to 4 years in Flanders from 2021).
Moreover, from a civil point of view, the donation is not without consequences either, since, in principle and unless otherwise provided for, it will be deemed, on behalf of the donor’s children, as an advance upon their share, which will be deducted from what will be due to them at the time of the death of the donor.
Therefore, this gesture is not trivial.
As for customary gifts, they are not taken into account from a civil point of view at the time of the death of the ‘offeror’ nor are they taxed at the time they are given, or later, unless they are subject to re-qualification by the tax authorities… In addition, unlike the gift between spouses, which is revocable at any time with no necessary justification, a customary gift remains irrevocable.
While there is no absolute legal rule to differentiate gifts from donations, the following are some practical elements which should help you to avoid such re-qualification:
- In order for a ‘gift’ to be considered as such, it should only represent a modest and proportionate diminution of the gift-giver’s wealth. Hence, it is generally considered acceptable to give up to 1% of one’s assets as a gift annually. Beyond that, it could be perceived as a donation.
- The gift might be an object, a work of art, an envelope, a bank transfer… provided that it is related to an event justifying such a reward (a birthday, a child birth, a wedding, a graduation, a Christmas present, etc.). Finally, in case of money and bank transfer, it must be clearly stated that it is a gift, for instance by mentioning “congratulations on your wedding”, or by sending a letter expressing this particular intention.
Should you still have any doubts about the rewards you intend to grant, do not hesitate of taking some advice from FLINN in view of avoiding any possible misinterpretation.