Donation of real estate

It is important to know that in order to donate a large amount of real estate – an apartment, house or land plot – a good heart alone is not enough. It is mandatory that the donation of property be notarized. Article 6.469, Part 2 of the Civil Code of the Republic of Lithuania provides that a donation agreement for an immovable property, as well as a donation agreement for an amount exceeding EUR 14,500, must be in notarial form. This means that if you donate property whose value corresponds to or exceeds the specified amount and do not take care of notary approval, a lot of problems may arise in the future regarding the declaration of the gift received or disputes with other persons claiming the property. In addition, it is important to perform notarial actions, but also to know the difference between donating property to relatives and those with whom you are not related, and what is the taxation of the donated property received.

Gifting property to relatives.

• It is worth noting that when donating real estate to relatives - spouse, child (adopted child), parents (adoptive parents), brothers, sisters or grandparents, the aforementioned laws on the donation of real estate apply. If the value of the real estate exceeds 14,500 EUR, a notarial contract must be concluded. In the case of a gift of an item (money or other property) worth more than 1,500 EUR but less than 14,500 EUR, the laws provide for a requirement for written form.

Gifting property to other persons.

• It should be noted that in cases where real estate is donated to persons with whom there are no family ties, it is important to comply with the same laws on the donation of real estate.

Taxation of received donated property.

• It should be emphasized that in certain cases, upon receiving a gift of high-value real estate, the recipient of the gift may have to pay personal income tax (PIT), which varies accordingly depending on the value of the property. PIT tax applies to those who received a gift from a person who is not related by blood. It should be emphasized that this tax does not need to be paid when the property is donated to a spouse, child (adopted child), parents (adoptive parents), brothers, sisters or grandparents.

Sale of donated property

‍When deciding to sell a donated property, many people face certain problems and unplanned expenses. This usually happens when the sale of the donated property is carried out without knowing all the laws and requirements. First of all, it should be emphasized that the sale of real estate may be unprofitable if you sell the property too quickly or without being familiar with the taxes that must be paid when selling donated real estate in certain cases. Therefore, it is very important to know when the sale of donated property is taxable and when it can be sold.

Taxation of the sale of donated property.

• It is important to note that income from the sale of property that was inherited or received as a gift is subject to GPT if the heir or recipient of the gift has not retained their ownership rights to the inherited or donated property for 10 years from the date of inheritance or donation. In such a case, 15 percent GPT must be paid, calculated on the increase in the value of the real estate received. When is GPT not required to be paid? In the case where the seller has lived in that property for at least the last 2 years prior to the sale of the real estate and has declared his place of residence there. GPT is also not applicable when the seller has lived in the property being sold for less than 2 years prior to its sale, but has declared that property as his place of residence and has used the funds received from the sale of that property within 1 year of the sale to purchase another property located in the European Economic Area.

When can donated property be sold?

• A common question: when can donated property be sold? It is worth noting that donated real estate can be sold at any time, taking into account your needs. However, it is not advisable to rush, because the urgent sale of real estate is often not the most beneficial solution. The article of the State Tax Inspectorate (VMI) clearly states that a resident's income received from sold (or donated) real estate is classified as non-taxable income if that property has been owned by the resident for at least 10 years. However, it should be noted that the amount received from the sale of donated real estate is not fully taxed. It is emphasized that the difference is taxable, which is calculated by subtracting the purchase price of the property and mandatory payments, which are supported by documents, from the sale proceeds. The resulting difference is taxed at a 15 percent income tax rate. It is very important to know that the acquisition price of property received as a gift is considered to be the fair market price on the date of receipt of that property.

It should be emphasized that knowing all the mentioned aspects of selling donated property will help you avoid surprises and financial losses. It is also important to emphasize that if additional questions or uncertainties arise Real estate experts, with diverse experience and knowledge, always ready to help you.