Dutch officials propose cutting parents’ tax-free gift allowance for children

Dutch officials propose reducing the gift allowance for parents, cutting the tax-free limit on monetary gifts they make to their children, De Telegraaf reports. The advice, issued by the Ministry of Finance to State Secretary Eelco Eerenberg, notes that while most gifts received from family, friends, and colleagues are tax-free up to 2,769 euros, gifts to biological children, step-children, and foster children are tax exempt up to 6,908 euros. Parliamentarians have reacted strongly against the ministry's reasoning to narrow the difference by limiting exemptions on gifts from parents.

“Fiscal advantage for gifts to children is no longer appropriate,” the ministry wrote, noting that the rule was introduced more than a century ago to prevent financial contributions to children’s upkeep from being taxed. Since the 1980s, such contributions are no longer considered gifts, making the original rationale outdated.

The officials emphasized that while the aim of lowering taxes on transfers to children remains, fewer people today have children and thus miss out on the benefit. They propose making the allowance less dependent on the recipient’s relationship to the giver, though no specific new amounts were suggested.

Nearly 40 percent of gifts fall between 5,000 euros and 7,000 euros, just below or at the exemption limit, while 35 percent are smaller than 5,000 euros. Officials estimate that removing or reducing the tax-free allowance could generate around 60 million euros, a relatively minor sum in the broader tax system. Eerenberg, who is a member of Prime Minister Rob Jetten's centrist D66 party, has promised to respond to the evaluation before summer.

The ministry referenced a survey of givers and recipients showing that nearly half of gifts are intended simply as “a financial bonus” for children. Another 35–40 percent of gifts are used to transfer assets in a tax-efficient way and reduce future inheritance taxes. Only about 10 percent of gifts have a specific intended purpose.

But in a follow-up to their initial reporting, a collection of far-right, right-wing, and center-right political parties showed disdain for cutting the tax-free benefit on gifts from parents to their children. Representatives of 11 factions in the Tweede Kamer, the lower house of Parliament, were against the concept, including two of the three coalition parties. It was not yet clear if D66 parliamentarians were against the plan.

"Parents who work hard for their children shouldn't be fined for it. Gifts and inheritances are already much more expensive in the Netherlands than in other countries. Further increasing taxes on inheritance and gifts will not be acceptable to the VVD," says VVD MP Wendy van Eijk-Nagel to the Telegraaf. Her party is in the coalition government along with D66 and CDA.

"Helping your children financially is also part of looking out for one another, said CDA MP Inge van Dijk. "We're not going to change that."

"Compared to other EU countries, our exemption is already very meager," said PVV MP Elmar Vlottes. The far-right party is the second-largest in opposition in the Tweede Kamer after left-wing Labour and Green collective GroenLinks-PvdA. Vlottes argued that "taxes have already been paid" on the income and savings used to provide gifts for children.

The parties opposed to the Ministry of Finance advisory statement represent 94 of 150 seats in the Tweede Kamer. They include the VVD and CDA, and opposition factions PVV, Ja21, Groep Markuszower, FvD, BBB, ChristenUnie, SGP, 50Plus, and independent MP Mona Keijzer, who recently left the BBB. Together, they also represent 42 of the 75 seats in the Eerste Kamer, the Dutch Senate.

Considering the uphill battle in Parliament, and the precarious nature of the minority coalition government, the Cabinet would need to win over every left-wing and centrist party to move forward with the proposal. They would also need to craft a compelling argument to flip the coalition parties' own parliamentarians to get close to earn a majority in either house.