Money gift tax: do you need to pay personal income tax on a cash gift?

Money gift tax: do you need to pay personal income tax on a cash gift?

If money is transferred to you, then you may want to know whether there is a tax on the gift of money, what amount of money is not taxed, and whether the fact that the money is given by a close relative plays a role for taxation. In this article we will answer these questions.

Is donating money taxable?

Let's turn to the Tax Code of the Russian Federation. In accordance with the law, when determining the tax base for calculating personal income tax (NDFL), all income of the taxpayer received both in cash and in kind is taken into account (Clause 1 of Article 210 of the Tax Code of the Russian Federation).

But according to clause 18.1 of Art. 217 of the Tax Code of the Russian Federation are not subject to taxation (exempt from taxation) income in cash and in kind received from individuals as a gift, with the exception of cases of donation of real estate, vehicles, shares, shares, shares, unless otherwise provided by this paragraph.

Further, in paragraph 2 of clause 18.1 of Article 217 of the Tax Code of the Russian Federation, the following is stated: “Income received as a gift is exempt from taxation if the donor and recipient are family members and (or) close relatives in accordance with the Family Code of the Russian Federation (spouses, parents and children, including adoptive and adopted parents, grandparents and grandchildren, full and half (having a common father or mother) brothers and sisters).

Those who have become familiar with this norm may still have questions about whether they need to pay tax on donating money to a non-relative, and whether all individuals are exempt from paying personal income tax if they are given money as a gift.

Tax on gifts of money between close relatives and non-relatives

The tax under a monetary gift agreement is not paid both in the case of a gift between relatives and in the case of a deed of gift for money between people who are not relatives.

In order to eliminate ambiguous interpretations of paragraph 18.1 of Article 217, the Federal Tax Service of the Russian Federation provided clarifications. Thus, it is indicated that paragraph 2 of the considered paragraph of the Code applies only to those cases when the subject of the gift agreement is real estate, vehicles, shares, shares, shares. Income in the form of other property and property rights not related to the specified list, received under a gift agreement, is not subject to taxation for the purposes of Chapter 23 of the Code, regardless of whether the donor and recipient are family members and (or) close relatives (Letter of the Federal Tax Service of Russia dated July 10 .2012 No. ED-4-3/ [email protected] ).

Tax on gift money is not paid when donating between individuals.

Gift of money between individuals: taxation

So, when donating funds between individuals:

• income in cash received by an individual as a gift from another individual is exempt from personal income tax on the basis of clause 18.1 of Article 217 of the Tax Code of the Russian Federation, regardless of the fact that the donor and donee are not family members and (or) close relatives;
• in this case, individuals who were given money do not need to declare income (Letter of the Ministry of Finance of the Russian Federation No. 03-04-05/6-200 dated 02/21/2012).

The tax on gifts of funds between individuals (including when specifically donating money for the purchase of an apartment or car) is not paid in any case (unlike the tax when donating a car or personal income tax when donating an apartment, where family ties between the donor and the recipient are important ).

How much of a gift is tax-deductible?

As can be seen from the provisions of paragraph 18.1 of Article 217 of the Tax Code of the Russian Federation, the amount of donated funds for tax purposes when donating money between individuals does not matter.

But when donating money to an individual, an organization or individual entrepreneur, the amount of money donated plays an important role. On what amount is tax paid when donating money to an individual in this case? According to paragraph 28 of Art. 217 of the Tax Code of the Russian Federation, income of individuals - gifts to the taxpayer from organizations or individual entrepreneurs - is not subject to taxation (exempt from taxation), if the value of the gifts does not exceed 4,000 rubles. This rule also applies to gifts in the form of cash.

So, in the article we answered the question of whether it is necessary to pay tax on donated money. If another person gives you a cash gift, you do not have to pay gift tax on the money. In this case, the amount of money does not matter, nor does it matter whether the donor and the recipient are close relatives or non-relatives.

Posted by:

Ralenko Anton Andreevich

Moscow 2019

Why do you need permission and in what cases?

First, you need to understand why consent to a deed of gift is needed. The legislation determines that the common joint property of the spouses is the property acquired by them during their family life. Everything acquired from the moment of marriage until its official dissolution will fit into this category.

There are certain conditions for it to be legal to dispose of it:

• any real estate transactions are possible with the written approval of both owners;
• the allocation of a specific share of housing can be made at the request of one of the parties.

When it comes to donating an apartment, there is a transfer of ownership rights to another person, and there is a legal need for the consent of the second owner.

It is a written, notarized permission to alienate part of the jointly acquired property. All this is carried out in accordance with clause 2 of Art. 253 Civil Code of the Russian Federation.

Risks and sanctions in case of detection of undeclared personal income tax.

If undeclared income is discovered, an individual, in addition to additional personal income tax, is subject to additional fines in the amount of 20% of the unpaid tax amount, as well as a penalty.

There are cases where regular income from individuals was regarded as illegal business activity, and criminal liability is possible. Despite the fact that individuals are not entrepreneurs, inspectorates often initiate on-site inspections and charge additional personal income tax and VAT. The courts support the inspectors.

The appeal against the decision of the St. Petersburg City Court dated November 10, 2014 No. 33-17691/2014) indicated that an individual conducting business activities without registration as an individual entrepreneur, in case of failure to fulfill the duties assigned to them by the Tax Code, does not have the right to refer to the fact that it is not an individual entrepreneur (Article 23 of the Civil Code and Article 11 of the Tax Code) and is not a VAT payer. Having analyzed the lease agreements, the court found that the agreements took into account the possible risks of business activity. Witnesses testified that the person being verified had been systematically making profits from renting out premises for a long time. Thus, the plaintiff fell under the article on illegal business activities. The rules of law applicable to individual entrepreneurs who are VAT payers were applied to him. VAT, personal income tax, fines and penalties were collected from the taxpayer.

A similar opinion is contained in the ruling of the Novosibirsk Regional Court dated October 14, 2014 in another case - No. 33-8775/2014 - based on the results of an on-site tax audit of an individual, the inspectorate assessed additional personal income tax, VAT, penalties and fines.

Calculation of the amount of tax paid

The formula for calculating personal income tax is provided for in Art. 225 Tax Code of the Russian Federation. It is very simple and involves a single mathematical operation. The final tax amount is calculated by multiplying the tax base by the applicable interest rate.

Additionally

Personal income tax implies the existence of a number of rates, but only two are relevant regarding donations: 13% and 30% (Article 224 of the Tax Code of the Russian Federation). Therefore, the calculation difficulties relate exclusively to determining the tax base. The general principles of calculation are established by Art. 210 Tax Code of the Russian Federation.

The base is calculated separately for each type of income , for which different interest rates are specified. For income taxed at 13% personal income tax, the base is determined as the difference between income taxed at this rate and the amount of tax deductions (Articles 218-221 of the Tax Code of the Russian Federation).

Example

In the calendar year (according to Article 216 of the Tax Code of the Russian Federation, this is the tax period for personal income tax), a person was given a house and land; he also received payment from the tenants and worked. All this income - the cost of home ownership, rent and wages - is subject to personal income tax at a rate of 13%. The employer paid the salary tax to the budget for him, acting as a tax agent. Everything else must be summed up and multiplied by 13%. In the absence of tax deductions, this is the final amount of personal income tax.

The fact of foreclosure on a gift to pay off the donee’s debts is not taken into account when collecting personal income tax. For example, an apartment is donated to a malicious bank debtor. From the moment of registration of property rights in the Unified State Register of Rights to Real Estate and Transactions with It, this information is publicly available, including to the bailiff. If the debtor does not have money, income or movable property, the bailiff will describe and sell the apartment at public auction. The donee will lose the property, but he will still have .

Features of the tax base for different types of property are established in Chapter. 23 Tax Code of the Russian Federation. When donating real estate, the base is usually determined based on its cadastral value. You can find out by requesting an extract from the State Cadastre . The cost of other gifts is determined based on market prices at the time of donation (Article 228 of the Tax Code of the Russian Federation).

Donation of real estate between spouses

There are cases when an apartment donation agreement is concluded between a husband and wife. In this case, the property rights of the other party must not be violated. With this type of transaction, a violation of rights is not recorded.

The second party confirms its decision to allow the alienation of the apartment in its favor to the spouse by signing the agreement. The conclusion of such a transaction serves as a cover for tax evasion or other illegal actions that violate civil or tax law.

If necessary, the contract can provide a separate clause regarding the opinion of the other half, if one of the participants in the legal relationship wants to fix this in the document.

Dependence of the tax amount on the size of the gift in monetary equivalent

The amount paid as tax depends on the value of the gift. If it is indicated in the gift deed, then the task is much simpler.

For example, in 2021, P. A. Lozhkov received a gift from his aunt in the form of an apartment in Novokuznetsk worth 2 million rubles. By April 30, 2021, he managed to submit a declaration to the tax authority. The tax amount is set based on the total cost of the apartment: 2,000,000 * 13% = 260,000 rubles.

Citizens can deliberately lower the price of real estate so that the donee saves money and contributes a smaller amount. However, specialists from higher authorities can set their tax amount based on the market value of housing. The same applies to those cases when the contract does not indicate the price of the gift.

Inspectors determine values ​​based on the housing cadastral passport. However, the legislation does not clearly define the procedure for setting prices, therefore, if the owner does not agree with the calculated price, he can indicate his own.

The legislation does not establish a limit on transferred funds. The main thing is that the donee can pay the tax on time.

Is it possible to cancel a notarized consent of a spouse and how?

Current legislation does not provide for the cancellation of an already drawn up document. If the spouse decides to change his decision, then she must notify the notary in writing, and accordingly the other party. However, this will play a role, provided that the deal has not yet been concluded and has not undergone state registration.

Provided that the agreement is drawn up and has passed state registration, the party who decided to revoke its consent can go to court. During the trial, the plaintiff must prove to the judge that there were sufficiently serious reasons to change his decision.

As practice shows, it is extremely difficult to do. There are very few similar precedents when the filed claim was satisfied. The court usually takes the side of the defendant, especially when it comes to children acting as the donee.

Deadlines for filing a tax return and paying taxes

According to the tax code, 3-NDFL must be filed no later than April 30 of the following year after receiving the gift.

After reviewing the declaration, the person will receive an answer as to whether they need to pay tax. If the result is positive, payment must be received no later than July 15 of the corresponding year.

For example, in 2015, Yu. L. Belova, I. K. Ivanov’s second cousin, gave her uncle a dorm room. Since the girl is not a close relative of the citizen, Ivanov filed a tax return with the appropriate authority by April 30, 2016 and paid a tax of 13% of the total cost of the room by July 15, 2021.

Consequences of giving without consent

Failure to comply with virtually any law or regulation carries the risk of adverse consequences. Taking into account that Article No. 35 of the RF IC provides for the conclusion of a deed of gift, with the consent of the husband or wife certified by a notary, failure to comply with this rule may contribute to the recognition of the transaction as invalid, since it was concluded with violations.

If you choose the option in which the deed of gift for the apartment is carried out by a notary, the notary will simply refuse to conclude the deal due to the absence of one of the necessary documents.

A citizen whose rights have been grossly violated can demand that the agreement be cancelled. This process takes place in court, by filing a claim to invalidate the deed of gift.

Current legislation provides for a 3 (three) year statute of limitations when a person can go to court. If during the investigation it is revealed that the necessary permission is missing, then the living space is returned to the former owners.

When the donor or recipient does not need to pay tax

According to Russian legislation, if an individual or legal entity gives money as a gift, then he does not need to submit 3-NDFL to the tax authority. This procedure must be carried out by the donee, since it is he who receives the income from this financial transaction.

Sometimes there are cases when the donor receives a writ of execution from the tax authorities. The letter states the need to immediately declare your income and pay taxes.

In this case, there is no need to worry, since employees at the tax office most often receive information about the alienation of property or real estate, assuming that the owner has made a profit.

A person can write an explanatory letter to the specified address, attach a gift deed to the letter, or simply ignore the message.