Is it true that you have to pay tax on a cash donation of more than 500 euros? Even if it’s by bank transfer?
It is true that large gifts are not received every day, but it is equally true that, on some occasions in life, we receive one or another cash donation from someone who congratulates us on yet another achievement.
Despite being made with the best of intentions, this donation may, however, bring us some bitterness in the mouth: if the Tax Authorities are attentive, they may want to know who gave us money and why.
What does a cash donation consist of?
Before we get into the taxation rules, it is important to clarify what the Treasury considers a cash donation.
Contrary to what the name implies, Donations do not have to be made in cash., that is, it does not have to be a bundle of banknotes. If it’s a donation by Bank transfer or by checkfor example, also counts as a donation and is covered by the same rules that we will see later.
Is a gift a donation?
Unfortunately, cash gifts count as donations. This means that, if you get married or have a birthday, the amounts you receive are legally considered donations and, if they are within taxable amounts, you pay tax.
The amount above which a cash donation must be declared to Finance is €500. From that amount, you even have to notify the Tax Authorities that you have received a donation and pay tax on the amount you have received.
The exception is, of course, in-kind donations. If you receive a washing machine or a car, for example, you are not subject to taxation on cash donations.
The amount of gift tax
The tax that applies to cash donations is called Stamp Tax and corresponds to 10% of the amount donated. Thus, if you receive €1000 as a gift, you will pay €100 to the State.
note that who pays the tax is who receives the cash donation and not who makes itthat is, the tax amount is deducted from the total amount donated.
Stamp Duty Exemptions
Although all cash donations must be declared to the Treasury, there are cases in which no tax has to be paid. Values donated between a couple, parents and children, grandparents and grandchildren (siblings are left out) are exempt.
In these cases, you must indicate on the form the degree of kinship of the donor to be entitled to tax exemption.
How to declare a cash donation?
Any cash donation greater than €500 must be declared to Finance, regardless of whether or not it is exempt from Stamp Duty.
To make the donation known to the Tax Authorities, you must complete the respective form and submit it, together with the attachments I-03 It is II-02online or at a Finance counter until the end of the third month after the donation.
In the form, you must identify the donor, the context of the donation, the reason for exemption from Stamp Duty (if any) and the beneficiary of the donation.
Please note that, in the event that you receive more than one donation, you must complete a form for each donor, ie each gift must be declared on an individual form.
Find, on the Finance Portal, a document with filling instructions for all necessary documents.
Why do you have to declare the cash donation to Finance?
It may seem like unnecessary vigilance and the Portuguese are often suspicious of this need to tell the State everything, but declaring donations to the Tax Authorities is also a way of protecting themselves.
In fact, the Tax Authority is very attentive to what it calls “manifestations of fortune”, that is, if there is a record that a taxpayer is spending much more than what he earns, alarm bells sound.
To avoid having to explain to the tax authorities where a certain amount came from (which does not result from your income), go ahead and let them know that you have received a gift.
What happens if I don’t declare a cash donation?
Donations are difficult for the State to monitor, especially if they are made in cash. But that doesn’t mean they can’t be detected, taking into account the growing mechanisms for crossing data that the Treasury has at its disposal.
If you are making plans to deposit a cash donation in your bank account to get around the situation (because there are no transfers or checks), remember that banks are also attentive to deposits in excess of €5000.
Therefore, if you have received a cash donation of more than €500 and you do not declare it, you may very well end up paying a fine ranging from €150 to €3750. If you have even declared the donation but have not paid the respective tax, the fine can reach twice the amount of the tax due.
Article originally published in July 2019. Last updated in March 2023.