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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am a German citizen, living in London since 2012 (I am

Customer Question

I am a German citizen, living in London since 2012 (I am exercising treaty rights, been self employed for 3 years now, have received my registration certificate!) --- Both my German parents in Germany are over 70 now, and we were thinking about maybe they
should think about inheritance things at this point. They own 3 bigger houses in Germany, one of which currently is not used at the moment. --- So what if they were to gift that one to me? Is that potentially smarter, tax wise, then waiting until death? In
Germany, I think everything up to 400.000 EUR is tax free. Here is a similar rule, up to 325.000 GBP in place. --- If I get a gift over 200.000 EUR now, then after 7 years, that would be out of danger of being counted towards the tax threshold of 325.000 GBP,
right? So maybe selling one house now, and make a gift could be the smartes way, or am I missing something!?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question. I think you are getting UK tax law and German ditto a little mixed up. Whilst it is true that gifts can create Potentially Exempt Transfers for UK Inheritance Tax (IHT) as both your parents are non subject to UK IHT then you can forget about the seven year rule for UK IHT. As I understand it German Inheritance Tax and Gifts Tax are within the same regime and any tax due is the liability of the beneficiary, not the donor. There exists under the German tax regime a Personal Exempt Allowance of 400K Euros per child, so if they give you a house up to this value you would escape German tax also. The amount exceeding this tax exemption will be taxed at a rate which again depends on the personal relationship of the beneficiary to the donor and can range from 7% up to 30%. Here is the tax range for the amount over 400K" 75,000 7% 300,000 11% 600,000 15% 6 million 19%13 million 23%26 million 27% more than 26 million 30% So you see your possible liability under German tax law depends upon the value of the property transferred. The UK does not have a gifts tax so the transfer of property is outside the scope of UK taxation. I do hope that my answer has cleared the air for you in this matter.
Customer: replied 2 years ago.
You say, there is no UK gifts tax, but what about the following then:
https://www.gov.uk/inheritance-tax/gifts
Expert:  bigduckontax replied 2 years ago.
UK IHT rules do not apply as your parents live in Germany and are not subject to UK IHT. As they are resident in Germany then any tax due on the gift is payable by you under German IHT rules as I explained.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.