Basic rule
If you donate money or other movable assets (other than real estate) in Belgium, you are not legally required to pay any gift tax on this. You can, but are not required to do so. If you do register the gift through a Belgian notary, you will need to pay a gift tax. Movable assets are subject to a flat rate of 3 pct. between partners and direct descendants in Brussels and Flanders (and 3.3 pct. in Wallonia). The tax rate is 7 pct. (or 5.5 pct.) for other beneficiaries.
Paying the gift tax means that you may rest assured that the beneficiary will no longer be liable for any inheritance tax on the gift afterwards. However, if you prefer to skip the paperwork at the notary and not pay any gift tax, there is an important risk involved.
If you do not register the gift (i.e. so-called informal ‘hand’ or ‘bank gift’), you do not pay any gift tax, but then there is a risk period within which inheritance tax is still due if the donor dies. In Flanders, there is currently a 3-year risk period. Since 1 January 2022, the risk period is 5 years in the Walloon Region. Brussels will now follow this example.
Two-year extension
Since 1 January 2024, Brussels is following Wallonia’s example by extending the risk period from 3 to 5 years. The goal is obviously to encourage the registration of (informal) gifts by increasing the risk of potentially being liable for (higher) inheritance taxes.
Back in 2020, the Flemish region was the first to announce an extension of the risk period from 3 to 4 years. However, it later withdrew its proposal again. For the time being, the Flemish region maintains a 3-year-risk period.
When to register?
If you would think of registering your gift, it should actually not be done immediately after the gift has been made. The donor can decide initially not to register and just wait and see. If he would then become seriously ill during the risk period, the gift can still be registered, even in extremis. Of course, this scenario does not work if you would pass away unexpectedly.
If the parties would choose at that moment to voluntarily register the gift, they should take into account the specific procedure to follow. A gift can normally be presented to the tax authorities for registration in 3 different ways:
- online, through MyMinfin, by uploading the gift documents;
- by mail, by sending the gift documents to the appropriate scanning center;
- by appointment and going to your local tax office.
The competent department will then rigorously review the gift documents for all essential information, which must allow for the correct collection of gift taxes. Among other things, the documents must state the value of the donated property and the tax residence of both donor and beneficiary/-ies during the 5-year period preceding the gift, under penalty of refusal to register. You can also ask a Belgian notary to prepare the gift documents in advance to make sure they are compliant.
Alternatively, you can also subscribe to a gift insurance policy. The level of the insurance premium depends on the age and health situation of the donor. The extension of the risk period to 5 years will now logically result in a higher gift insurance premium. If you would pass away during the risk period, the policy would come into effect. The insurance company will then compensate the beneficiary/-ies for any inheritance taxes that may be due.
What for gifts made before 2024?
Normally, the extended risk period will apply only to gifts made after 1 January 2024. We say ‘normally’ because two years ago, the Walloon Region considered applying the extension to all gifts for which the 3-year term had not expired on January 1, 2022. However, after substantial criticism, this idea was then quickly abandoned afterwards.
Therefore, we can reasonably assume that the Brussels Region will also apply the extended term only to gifts made in 2024.
Key takeaways
If you are thinking of doing some estate planning this year and potentially making a donation, do consider whether registering or subscribing to a gift insurance makes more sense for you. The key element is to find the right balance between smoothly passing on your belongings to the next generation and keeping taxes in check.
The Belgian system provides the flexibility to register the gift afterwards, in case you would get seriously ill, for example, or take out a gift insurance that compensates the inheritance taxes that your beneficiaries would be faced with.