Bank transfer from parents to children, when do you pay taxes?

Transfer from parents to children seems like a banal banking operation, which does not involve any limits and which can be made like a donation.
But are we sure that this is always the case? Can a parent give their children as much money as they want with a bank transfer? In most cases the answer to this question is always positive as long as you follow the right process and insert the right reason.
In some cases, however, children are required to declare the money they receive via bank transfer from their parents and, therefore, pay taxes on it.
Let's explain to understand when it is necessary for a notary to be present for the donation and when it is not necessary, before addressing the cases in which children are required to declare what they received from their parents via bank transfer.
If the donation that father or mother make to their children is of modest value, it must have a precise reason and it is not necessary for a notary to be present to regulate it.
A donation of modest value is one that does not impoverish the donor (therefore has an insignificant impact on his finances) and does not enrich the recipient too much (for the same reason).
However, if it is an important donation that cannot be considered of modest value, the presence of a notary is almost always necessary.
Unless it is an indirect donation such as one aimed at a very specific purpose.
Such as the donation for the purchase of a property or a vehicle, or to pay off a debt.
The parent's bank transfer could also be a loan.
Or repaying a loan.
But it must always be specified in the reason for payment.
If it is a donation, a loan or a loan repayment, the transfer is irrelevant for tax purposes and the sum received should not be considered as income.
And in fact we won't have to pay taxes.
Read also Indirect donation: how does it work? In all the cases described, the child is not required to declare the amounts obtained which, therefore, will not contribute to the formation of taxable income and are not taxed.
But there is a specific case on which the ruling of the Piedmont Tax Commission sheds light, number 773 of 6 October 2021 which is worth examining further because it sheds light on the story of a father who made a bank transfer to his daughter, but the latter did not provide evidence that this movement was “fiscally irrelevant”.
The ruling of the Piedmont CTR rejected both the taxpayer's main appeal and the incidental appeal of the Office, which had initially partially accepted the taxpayer's appeal.
Let's see the details.
Transfer from parents is income and must be declared: the ruling of the Piedmont CTR There are two elements in support of ruling 773 of the Piedmont CTR: first of all, the reason for the transfer did not include the reason for donation, but the reason for "restitution" was indicated.
Secondly, the reconstruction of the facts presented was not clear at a fiscal level: let's go into detail.
As the Tax Commission maintains, in the context of money transfers via bank transfers, the sums credited by the father to the daughter's bank account are presumed to be unreported income, unless the taxpayer provides proof that such bank movements are fiscally irrelevant.
In fact, the taxpayer claims that the transfer received from her father would be money derived from the reduction in the company's capital following and as a result of its transformation from a joint stock company into a limited liability company.
The money had been transferred to the father and subsequently there had been a partial repayment between 2002 and 2006, completed with a transfer of 152,000 euros (subject of the case).
But as the sentence makes clear, this explanation is not based on any evidence: "It is not proven that the sum was sent by GL to the father for investment nor that the subsequent transfers from the father to the daughter, including the one subject to cause had its return as the reason.
It is worth remembering that it is the taxpayer's responsibility to provide proof of the transaction underlying the credited sums, proof which does not exist in this case." read also Donating money to children: how to avoid risks with the new 2023 cash limit Bank transfer from parents: burden of proof on the children's part The CTR Piedmont clarifies that it is essential that the taxpayer (therefore in this case by the daughter) provides a adequate evidentiary support from the store underlying the money transfers in question.
In rejecting the taxpayer's appeal, the CTR Piemonte states that bank transactions can be used as presumptive evidence of greater revenues or taxable operations, both to demonstrate the existence of a possible hidden activity (business, art or profession), and to quantify the income it derives.
The taxpayer must therefore prove that the bank movements that are not justified on the basis of the declarations are not fiscally relevant.
Finally, the CTR specifies that it could not be a donation both because the appellant himself had provided a different explanation, and because the reason for the transfer indicated the wording "restitution", and is therefore incompatible with its classification as a donation.
Consequently, the taxpayer will have to pay taxes on what she received via bank transfer from her father.
We leave the sentence in comment attached for further details.
In conclusion, when do you pay taxes on parents' transfers? If a parent makes a transfer to his child from his own savings and specifies that it is a donation, the offspring is not required to declare this income.
It is assumed, in fact, that in order to put these sums away the parents have saved them from their own incomes (on which taxes had previously been paid).
Even in the case of loans from parents to children, the sums do not constitute income and are therefore not subject to taxation since a loan must be repaid.
If, however, the parent writes "refund" in the reason for the transfer and the sums in question do not appear in any declaration by the son or daughter, it is assumed that these are income that they want to hide from the tax authorities, turned over to the parent and which are then returned.
To be returned, these are incomes that initially belonged to the child and, therefore, the latter must demonstrate that they are not fiscally relevant.