Tax-free gifting


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Every now and then I come to point out financial milestones to people, who then put me to work to tell the more about it. In this case, my brother is turning 40 years of age this year (my significantly older brother, of course) – and I pointed to my parents that this is the last year they can take advantage of some specific tax-free gifting, even if they don’t have the cash. In order to tell them more, of course, I need to learn more and at the same time tell you more. So let’s have a look at tax-free gifting in the Netherlands (2020 edition, numbers can vary in future years).

“Remember that the happiest people are not those getting more, but those giving more.” 

―H. Jackson Brown Jr.

Annual gifting

First off – the smaller gifts – every individual can gift someone a certain amount of money, tax-free, depending on their familial relationship. Which really only comes in two flavors, parents can gift their child € 5,515 per year, everybody else can gift someone € 2,208 per year. Partners – such as parents – are seen as a single entity (divorced parents included), this also means that you and your partner together can only get a maximum of € 5,515 from your parents (not € 5,515 + € 2,208).

As an example, my parents would be allowed to gift me € 5,515 this year, but they would only be allowed to gift my son € 2,208, before we would need to pay taxes over this. Whether or not this fits into the economic outpatient care Dr. Stanley warned about in his book “the Millionaire Next Door” is a topic for another time. The fiscal opportunity is there.

Once-in-a-lifetime gift

Now let’s talk about some big numbers. There are three, once-in-a-lifetime gifts that can be given, in replacement of an annual gift (not in addition to). These are:

  • A gift for purchasing or rebuilding a house, or paying off the mortgage.
  • An expensive education (parent to child only).
  • A purpose-free gift (parent to child only).

All three can only be given when the receiver is between 18 and 40 years of age (the 40th birthday is the last day allowed). For all three you’ll need written proof of the transaction (notarized) and the use for the designated purpose.


The biggest amount, has the requirement to be used to buy a house, rebuild your home or pay-off (part of) the mortgage on your home. It has to be the primary residence, not a second – or vacation home. No other requirements from the receiver are allowed to be attached to this gift. This gift has a maximum of € 103,643 and, unique to the three, can be gifted by anyone (not just the parents to their child).

The money in this category can be given in different years, but before both you and your partner have reached the age of 40 and within 3 consecutive years at most (at the latest in 2022, starting 2020), after which all of it has to be spent on the allocated purpose.

The exception to using all the money on the designated purpose is that you can still use the annual gift to spend freely (it is included in the maximum of € 103,643 – or if it is a gift of a parent to a child you can use up to € 26,457, the maximum amount of the purpose-free gift (see below), to spend on things besides the home.


The second biggest tax-free gift that can be given is € 55,114 for an expensive education, only by parents to a child. The requirement is that this education costs at least € 20,000 per year (excl. housing or food). As with the gift for the home, it needs to be spend within 3 years (at most 2022, starting 2020). Also here, to € 26,457, the maximum amount of the purpose-free gift (see below), can be spend on things besides the education.


The last, already mentioned twice above is € 26,457 free to do with as the receiver pleases. As this gift has no defined purpose, there is also no defined time in which it must be used for said purpose – this creates a possibility to gift it on paper, instead of in cash.

Gifting on paper?

When parents wish to gift a portion of the future inheritance tax-free, but all of their assets are illiquid (i.e. stuck in the house). They can gift the money on paper, stating that this part of their assets belongs to the child. All of this needs to be properly notarized in order to be fiscally legal.

This creates a so-called debt out of generosity (‘schuldigerkenning uit vrijgevigheid’ in Dutch). With a consequence that the receiver does not physically get the money, but should be paid an interest of at least 6% annually. This is because it is seen that the gift receiver is in fact loaning the money until they can get it in full.

To illustrate, using the maximum of the purpose-free gift of € 26,457 – the parents would need to pay their child € 1,578 in (tax-free) interest per year, until the money has be liquefied or the child has inherited the parents’ assets. It might not be suitable for parents that did not have the money available to begin with to pay even more in interest, but € 1,578 is below the annual tax-free gift of € 2,208 that a child could gift to their parents. 

This gives an option to return the interest paid – however it is still required that the interest appears annually on the child’s bank account every year until the full gift is received in order for the tax-benefit to be valid.

What’s the (tax-)benefit?

Depending on the (familial) relationship the receiver can save between 10 – 40% of taxes to be paid on the gift – or inheritance in case of the gift on paper. In the example of the purpose-free gift, gifting on paper could save the receiver between € 551.10 and € 5,291.40 in taxes – depending on the size of the inheritance. 

What would you decide if you had children about to turn 40 – would you go for one of the big donations, in cash or on paper, or let them have it after you die (if anything’s left)?

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