Joint Accounts and Tax Implications: When a Transfer Can Be Considered a Gift

The use of joint bank accounts is a common practice among members of the same family or business partners. Despite the convenience they offer, their management may create serious tax consequences, especially when money transfers are made without proper documentation.
The Independent Authority for Public Revenue (AADE) has repeatedly pointed out that, in certain cases, the withdrawal or transfer of funds from a joint account may be characterized as a donation, leading to tax charges if the corresponding declaration has not been submitted beforehand.

The “contribution” rule in the account

Tax law stipulates that when one of the co-holders of a joint account uses funds without having contributed to the creation of the balance, the amount received is considered a benefit to them. For example, if a parent and their child hold a joint account and the child transfers money from it to their own personal account, while having not contributed to the deposit of the funds, this act may be deemed a donation and entail tax obligations.
Such acts must be declared through the electronic platform myPROPERTY, where monetary gifts and parental benefits are recorded, so that it can be determined whether they are exempt from tax or subject to taxation.

Exemption limits and conditions

The law provides for full exemption from gift tax for transfers up to €800,000 between first-degree relatives, that is, between parents, children, spouses, grandparents, and grandchildren. This exemption applies exclusively when the transfer is made through the banking system and is officially declared.
In contrast, the mere co-ownership of funds in a joint account is not automatically considered a donation. The problem arises when the co-holder who has not contributed capital uses the funds for their own benefit.

How the tax administration acts

In practice, audits mainly focus on large amounts and not on small daily transactions. However, when transactions exceed a certain limit or concern accounts with multiple co-holders, the tax authorities may request proof regarding the origin and the beneficiary of the funds. Thus, even a seemingly simple bank transfer may raise an issue if there is insufficient documentation.

The procedure of submission and control

After the electronic submission of the declaration via myPROPERTY, AADE cross-checks the data with the information sent by the banks. If the transfer is not confirmed or the required supporting documents are not submitted, tax is imposed without any tax-free threshold, starting from the first euro. The tax rate ranges from 10% to 40%, depending on the degree of kinship between donor and donee.

What citizens should pay attention to before a transfer

Experience has shown that many tax burdens arise from misunderstandings regarding the rules governing monetary donations. To avoid problems, it is important to adhere to the following basic principles:

1. Use of the banking system: Every transfer concerning a parental benefit or donation must be made through a bank or other credit institution so that it can be transparently documented.
2. Avoiding cash transactions: Amounts given in cash without prior bank record are taxed separately at a rate of 10%, without any exemption.
3. Caution with “chain” donations: When money is transferred successively from one person to another, the tax authority may examine whether it is an indirect transfer to a third person not entitled to exemption. If such a case is established, a 20% tax is imposed without any exemption limit, especially if the transfers occurred within a short period of time.
4. Verification of the donor’s capability: The tax authority may examine whether the donor actually possessed the means to make the transfer, even after the declaration has been submitted.
5. Joint accounts with third parties: If the money is placed in a joint account held by the donee and another person, the audit will focus on who ultimately used the funds. If it is proven that the co-holder and not the donee used them, the transaction is taxed as a donation to that person.

In conclusion

Joint accounts may facilitate the management of a family’s finances; however, their careless use may lead to unforeseen tax obligations. Compliance with legal procedures and timely declaration of money transfers constitute the safest path to avoid tax traps. In any case of doubt or complex situation, the advice of a specialized legal or tax expert is essential.