Donation via the Netherlands now less attractive
February 2021 – A law published in the Moniteur belge of 11 December 2020 introduced a new obligation to register donations of movable property via a foreign notary, thus closing what has come to be known as the "cheese route" (in Dutch, "de kaasroute"). However, it is still possible to choose the route with the least restrictions.
The cheese route
Until recently, there were two situations where a donation had to be registered.
The first concerns the donation of real estate. All transfers of real estate have to be registered with the official responsible for registration fees, which means that registration fees are payable.
The second situation where registration is required is when a Belgian notarial deed of gift is drawn up. The involvement of a notary is in principle required for any transfer of real estate. If you make a donation of real estate, you are, in this respect, also subject to a registration obligation.
However, donations of movable property also require an authentic (or notarial) deed. And so there is, in this case too, an obligation to register (and to pay the corresponding donation fee).
There are a few loopholes. The cheese route is, or rather, was one of them. In this case, you apply to a foreign notary for your donation. The deed of gift is drawn up, but as it is a foreign deed, it does not have to be registered in Belgium.
Why "cheese"? Our neighbouring countries have a similar system of gift tax for donations made before a notary. With a few exceptions, including some Swiss cantons, but also (and much closer to home) the Netherlands. If you have your deed drawn up by a Dutch notary, you will have a donation that is perfectly valid in law, but you will escape the Belgian registration fees.
The new law
The law of 3 December 2020, published in the Belgian Official Gazette of 11 December, introduces a new registration obligation. The Registration Fees Code now provides that :
" Must be registered within the time limits set by Article 32 ...
6° notarial deeds executed in a foreign country which are evidence of an inter vivos donation of movable property by an inhabitant of the Kingdom. "
The obligation to register is incumbent on the contracting parties to the deed of gift before the foreign notary. In the classic case where a Belgian gives a sum of money or a work of art to another Belgian, both the donor and the donee are therefore obliged to register the donation. The Dutch notary is, of course, not obliged to do so.
If you are one of these two parties, you have four months in which to fulfil this registration obligation.
And then never again?
The Cheese Route is of little interest when it comes to saving taxes. Dutch notaries are sometimes cheaper, but the purely fiscal aspect is effectively closed.
However, there are still two things to think about in this respect.
For the donation of movable property, the general rate of gift tax in both the Flemish Region and the Brussels-Capital Region is 3% (for direct donations and donations between partners) or 7% (for all other cases). In the Walloon Region, it is 3.3% and 5.5% respectively. When donating a small amount of money or a low-value item, always make sure that it is worth it.
For simple direct donations, manual donation is also always a possibility. The manual donation is in fact an exception to the civil law obligation to register any donation before a notary. The simple handing over of the money or property also has transfer value. There are, however, two major disadvantages to a manual donation: firstly, it is not possible (or at least, difficult) to impose conditions on the donation. No document recording the donation can be drawn up, as it would immediately be qualified as a deed of gift, which in this case is only valid if it has been drawn up by a notary. The second disadvantage is the problem of proof. When did the donation take place?
The suspect period
The Inheritance Tax Code provides that where a donation has not been registered, inheritance tax is due if the donor dies within three years of the donation.
This is a principle that applies in three Regions.
If you have made an outright manual donation and die within three years of that donation, the donee will have to bear the burden of proof that the estate (which, at the time of death, is no longer present) was given to him by manual donation more than three years before death.
It is therefore a matter of proving (a) that something was given, (b) that there was a willingness to give and (c) the time at which this occurred.
With a deed drawn up by a foreign notary (which, until recently, did not have to be registered), this was easy, but is no longer possible.
In mid-2020 the Flemish government decided to extend the suspect period by one year to four years from 1 January 2021. But in the end this will not happen. In view of the obligation to register Dutch acts, Flanders believes that it is currently no longer necessary to extend the suspect period any longer than necessary.
Genuine foreign donations
On the other hand, the legislator did not address the issue of genuine foreign donations. Imagine you live in Belgium, but you want to give an advantage to a person in Spain. At present, if you have such a deed drawn up in Spain, you may have to pay registration fees in both Spain and Belgium. The obligation to register foreign notarial deeds makes no distinction between deeds on which you have already paid fees abroad and others.
