Gift tax classification of donations from the biological but not legal father
With its judgment of 27 November 2016 (Ref.: 1 K 1507/16), the Fiscal Court of Kassel provided an important impetus for the gift tax treatment of donations within patchwork family situations: Even if the donating father is not legally recognized as a parent, the more favorable tax class I can still apply under certain conditions, provided the biological parent-child relationship is unequivocally established.
Legal basis of gift tax
According to § 15 ErbStG, gift tax is based on the degree of kinship between the donor and the recipient. Tax class I grants close relatives, in particular children, spouses, and registered partners, significantly higher exemptions and lower tax rates. For more distant relatives or unrelated beneficiaries, tax classes II and III apply, which entail less favorable tax conditions.
Difficulty with biological but not legal paternity
Traditionally, assignment to tax class I requires a legally recognized parent-child relationship—either by birth within an existing marriage, acknowledgment of paternity, or a corresponding judicial determination. However, in practice, situations increasingly arise where the biological parent does not possess legal parental status, for example, because another person is registered as the legal parent.
Content of the Kassel Fiscal Court decision
The Kassel Fiscal Court had to decide a case in which the biological, but not legal, father made a significant inter-vivos donation to his child. The responsible tax office initially applied tax class II, as the donor lacked legal paternity. In the course of the legal proceedings, however, biological paternity could be unequivocally established by a recognized parentage report.
The court concluded that the interpretation of the law must also take into account factual, biological kinship. Where there is clear and verifiable evidence of a biological parent-child relationship, the benefits of tax class I on gifts may be applicable, even if the legal parent relationship formally does not exist, for example, due to differing records in the birth register.
Justification and significance for practice
The extension of tax class I to cases of biological but not legal paternity takes into account the normative aim of promoting family support. The financial relief for the biological parent should not fail due to formal hurdles, provided the actual familial ties are proven. This strengthens the principle of tax fairness and accommodates evolving family structures.
However, it must be noted that the burden of proof for the existence of biological paternity rests entirely with the beneficiary. A mere reference to actual cohabitation is not sufficient; proof is required via a court-admissible report or other incontrovertible recognition.
Potential impact and evaluation
This judgment may serve as an important decision-making basis in similar factual constellations. However, it should be noted that the tax authorities and other fiscal courts are not necessarily bound by this legal opinion, and further examination may be necessary depending on the individual case. Particularly in cases where doubts about parentage exist or where competing parental rights of third parties are involved, complex and extensive examination processes may be triggered.
Outlook and further guidance
The judgment strengthens the rights of children vis-à-vis their biological but not legally recognized parents with respect to inheritance and gift tax. Ongoing developments should be monitored—appeal proceedings or legislative changes cannot be ruled out. In addition, the potential and limits of corresponding tax planning should always be considered in light of the individual family structure and legal framework.
Contact options
For more in-depth questions or an individual assessment of possible tax classes in cases of unclear kinship, interested parties may contact the qualified advisors at MTR Legal Rechtsanwälte. Here, in-depth expertise in inheritance and tax law is available to illuminate the often overlapping aspects at the intersection of family and tax law.
