Mixed gift – delimitation of consideration and gratuitousness adopted by administrative practice
As early as 2021, the Administrative Court (VwGH) limited the applicability of real estate income tax in the case of so-called mixed gifts of real estate, as consideration is only to be assumed if the consideration is higher than previously assumed by the tax authorities. This case law has now been adopted by the administrative practice.
A mixed gift is a gift in which the gift recipient provides consideration, which is why such gifts may also be subject to real estate income tax in certain cases. Unlike for the purposes of real estate transfer tax, the mixed gift is not split into a gratuitous, partially gratuitous and gratuitous part in income tax law, but is allocated uniformly according to the element that is in the foreground. Thus, the amount of the consideration also plays an important role, especially for the income tax assessment of real estate transactions.
Distinction between gratuitousness and non-gratuitousness
Previous view of the tax authorities
The Federal Ministry of Finance has also recently taken the view that in the case of a mixed gift, the 50 % limit derived from section 20 (1) no. 4 EStG is decisive in order to distinguish between consideration and gratuitousness (“predominance principle”, EStR 2000 margin no. 6625). Therefore, it was also assumed for income tax purposes that the gift character predominates and consequently a gratuitous mixed gift exists if the consideration does not reach 50 % of the fair market value of the transferred object.
Case law of the Administrative Court
Already in 2021, the VwGH dealt with the mixed gift as well as with the applicability of section 20 (1) no 4 EStG to mixed gifts and took a groundbreaking position on the 50 % limit in its ruling of 16.11.2021, Ro 2020/15/0015-6.
Accordingly, the delimitation of consideration and gratuitousness in the case of mixed gifts is to be made exclusively according to the principles already developed by case law in the past and not on the basis of section 20 (1) no. 4 EStG. On the basis of the objective circumstances, an intention to make a gift or an intention to enrich oneself on the part of the donor was to be concluded, whereby the main purpose or the overall character of the transaction was important. In the case of close relatives, an intention to make a gift could be assumed in case of doubt, which is why even in the case of a blatant disproportion between the performance and the consideration, the gratuitous character probably predominates.
If the value of the consideration does not deviate by more than 25 % from the value of the transferred asset and if there are no special circumstances that suggest a gratuitous overall character, a legal transaction for consideration is generally to be assumed.
Amendment of the Income Tax Guidelines
With the EStR Maintenance Decree 2023, the case law of the Administrative Court on the 75% limit has now been incorporated into the Income Tax Guidelines 2000 (EStR 2000), whereby the Federal Ministry of Finance has decided to differentiate between transfers before and after 16 November 2021 for practical implementation (EStR 2000 margin no. 6625).
For transfers prior to 16 November 2021 with a consideration between 50 % and 75 % of the fair market value, for which no gratuitousness was claimed vis-à-vis the tax authority, a subsequent “reclassification” into a gratuitous transfer transaction is not possible due to the obvious declaration of intent to conclude a legal transaction for consideration.
If, on the other hand, a gratuitous transfer was intended, but was not recognised by the tax office with reference to the 50 % limit, an amendment or revocation of the notices (within one year) is possible pursuant to section 299 BAO or, in the case of a reopening of the proceedings pursuant to section 303 BAO, in order to re-evaluate the question of gratuitousness or non-gratuitousness.
For transfers after 15 November 2021, according to administrative practice, the following now applies for income tax purposes:
- If the consideration amounts to at least 75 % of the fair market value of the transferred asset, it is to be assumed that there is a (paid) sale.
- If the consideration does not exceed 25 % of the fair market value of the asset transferred, the transfer is deemed to be free of charge.
- If the consideration is more than 25 % but less than 75 % of the fair market value of the asset transferred, a transfer between relatives is generally to be assumed to be free of charge.
Unlike the real estate transfer tax, which differentiates between consideration and gratuitousness on the basis of the threshold values of 70 % and 30 %, income tax law therefore refers to the corridor of 75 % and 25 %.
The consideration to be paid by the acquirer from his own funds also includes, for example, payments to be made to third parties and, in the view of the tax authorities, liabilities assumed (EStR 2000 margin no. 6655). However, residential or usufructuary rights retained by the transferor reduce the value of the property.
The 75 % limit is also applicable to divisions of estates and inheritance disputes, whereby the aforementioned regulations are to be applied to the compensation payments from non-estate funds.
In the case of mixed transfer transactions, it is important whether the intention of the transferor to receive a consideration is overridden by the partial intention to make a gift, because the transfer (with the exception of annuity transactions) is to be qualified either entirely as for consideration or gratuitously. The subjective intention of the transferor must be inferred from the circumstances of the individual case, whereby the value relationship between performance and consideration has a special indicative effect.
On the basis of the aforementioned Administrative Court decision, attention must be paid to the 75 % value limit in the case of family arrangements with the intention of making a gift or whether there is an obvious disproportion between performance and consideration. This is because the sale of real estate for consideration triggers the obligation to pay real estate tax according to section 30 EStG. The aforementioned principles also apply to the transfer of other objects (e.g. capital shares), provided that payments based on annuity transactions are not agreed as consideration.