Consider gift tax for special occasions
Many people use occasions such as the Easter holiday, Christmas, or birthdays to give gifts to family members. Wealthy individuals, in particular, often give substantial amounts that have little financial impact on them personally. From a tax perspective, however, these amounts can be quite significant in Germany.
Exemptions as the key to tax-free gifts
The basic rule is: Any gift given without consideration may be subject to tax in Germany. At the same time, however, the law provides various exemptions that ensure close relatives can regularly receive larger transfers of assets tax-free. These exemptions also apply between third parties, though they are significantly lower.
The tax-free allowances can be reused every ten years and thus form the central instrument for tax-efficient asset transfer. Once the allowances have been exhausted, the gifts are subject to tax.
Usual occasional gifts: When are gifts tax-exempt?
In addition to these general tax-exempt limits, the law also allows for the tax-exempt giving of gifts on special occasions, known as “usual occasional gifts” (Section 13(1)(14) of the German Inheritance Tax Act).
For a long time, giving even larger occasional gifts posed no tax issues, as the prevailing view held that the tax-exempt status of “usual occasional gifts” must be determined based on all the circumstances of the individual case. Until now, a comprehensive assessment of the circumstances was decisive: the closer the personal relationship, the more significant the occasion, and the greater the financial circumstances of the giver and the recipient, the higher the tax-exempt occasional gift could be. In practice, this relative approach meant that even very valuable gifts could be given tax-free.
Tax court clarifies: Net worth no longer counts toward tax-exempt gift limits
This previous interpretation is now being called into question. A recent ruling by the Rhineland-Palatinate Finance Court (FG Rhineland-Palatinate, ruling of Dec. 4, 2025, 4 K 1564/24) sets new standards and clarifies that personal financial circumstances may no longer play a role in determining tax-exemption in the future.
In the court’s view, what matters is not what is customary in the family or social circles of the giver and the recipient, but exclusively what the general public considers a customary gift. The court justifies this on the basis of the principle of equality: those with greater wealth should not be permitted to give higher-value occasion gifts tax-free than others. With this ruling, case law departs from the previously dominant relative approach.
Large cash gifts are treated as transfers of assets and are subject to taxation
In the case in question, a very wealthy father transferred EUR 20,000 to his adult son at Easter. The father had already made several gifts to his son prior to this and had exhausted the tax-exempt allowance. Under previous legal interpretations, there would have been good reasons to consider this gift “customary”: a close family, a donor with a fortune in the millions, and an amount that was of no financial significance to him.
Nevertheless, the court ruled that such a large sum of money on a recurring occasion like Easter could not be considered customary. Rather, monetary gifts of this magnitude would amount to a transfer of assets, and it is precisely such transfers that the tax exemption is not intended to protect.
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As a guideline, the court refers to the so-called small-amount threshold of approximately EUR 800, below which gifts to children often remain tax-free. While this is not a rigid limit, the general principle is clear: customary practice applies only to smaller, everyday amounts.
This makes clear: Large monetary gifts will in future be practically impossible to claim as tax-exempt under the occasion-based exemption. The sole determining factor is general social perception, and that simply does not consider five-figure sums at Easter or Christmas to be customary.
Transferring assets strategically and making use of tax exemptions
Even though gifts given on special occasions will remain tax-exempt only on a small scale in the future, there are still many ways to transfer assets in a tax-optimized manner. The generous personal tax exemptions – such as EUR 400,000 for children every ten years – offer considerable flexibility. In addition, models such as anticipated succession, usufruct arrangements, foundations, or family companies can be used to transfer assets in a planned manner.
For smaller gifts, occasions such as Easter or Christmas remain suitable, but only within the limits of what is actually customary according to general social norms. Those who wish to transfer larger amounts, however, should not link this to recurring holidays, but rather consider long-term, professional succession planning. We would be happy to assist you with this!
