Money as a Christmas present – are there rules or limits?

Morgaine Gerlach

Germans are generous at Christmas: statistics show that they spend an average of 281 euros per person on their loved ones. In addition to gift certificates, they’re not opposed to putting cash under the Christmas tree.

Do I need to take care of anything before giving cash in Germany? What amount requires me to notify the German tax authorities about a cash gift?

There is no need to notify the tax authority when giving small amounts of money. So you can feel free to accept modest amounts of money from relatives, or to give modest amounts yourself.

There is no specific number that marks the point at which you have to notify the tax authority when giving money as a gift. Different offices have different rules in this regard. A good rule of thumb is to declare gifts starting at 20,000 euros. If in doubt, ask your local tax authority. 

Tax free gift amounts

There is a simple reason for the requirement to declare large amounts of money given as a present: the tax authority needs to review whether or not the money will be subject to taxes. The taxable amount varies based on the relationship between the recipient and the giver. The closer the relationship, the higher the tax-free amount.

For example, parents can give their children or stepchildren up to 400,000 euros tax free. You can give your spouse even more, up to 500,000, without having to pay any taxes. Grandparents can’t give their grandchildren quite as much, but 200,000 euros tax free is still quite generous. Siblings, divorced couples and all other recipients have to pay taxes when receiving much lower amounts, with just 20,000 euros tax free. 

One important feature of taxation law for cash gifts in Germany is that the tax-free amounts are valid for ten years, after which they reset. Money given by one person to another within a ten-year period is added up to determine whether or not taxes are owed. If, for example, a mother gives her child 350,000 euros and then, later on, 60,000 euros, she will have exceeded the tax-free limit and the child she gave the money to must pay taxes. However, once the ten-year period has passed, the mother can give the child the full amount once more without the child incurring any taxes. That means that if you plan carefully and give the money over a longer period of time instead of all at once, you can save on taxes while transferring wealth – not just at Christmas! 

Things to consider when giving money to children in Germany

If the recipient is underage, their legal guardians, usually their parents, are responsible for the money and authorised to make decisions about it until the child comes of age. However, it is always the case that the money belongs to the child alone. Parents are not allowed to spend it on themselves and can only use it for the good of the child, for example to pay for a year abroad or driving lessons.

But what if you dont want to give cash? One alternative is an ISA containing ETFs or stocks and shares

Individual savings accounts (ISAs) containing stocks and shares or ETFs offer the potential for higher returns. Stocks and shares ISAs have proven to be an excellent investment, as they are very flexible and often inexpensive. The investor does not have to commit to investing for any specific length of time and can adjust the regular savings amount or even pause it completely as needed. It is best to invest in broadly diversified index funds, such as MSCI World. This is because these funds invest in shares from many different countries, which reduces risks. 

In addition, long term investments over a period longer than 10 years allow the investor to take advantage of market fluctuations, and therefore realise solid returns over the long term. 

Are you looking for an alternative to giving cash at Christmas time? Why not give your loved one gold instead of money? Our German blog post on investing money when children start school lists a variety of savings options for children that can also be given on occasions such as Christmas.


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Morgaine GerlachMedia Spokeswoman