Greece’s Independent Authority for Public Revenue, AADE, is stepping up checks on money transfers between relatives, parental gifts, donations and joint bank accounts, as auditors look more closely at how money moves within families.

Joint bank accounts, which are widely used by thousands of families in Greece to manage everyday financial obligations, are now under the microscope. A simple transfer from a joint account to an individual account, or to another joint account with different account holders, may under certain conditions be treated as a gift. That can trigger a tax audit and possible penalties.

With more than 1,000 cases involving parental gifts and donations included in this year’s audit programme, AADE is examining not only who sent the money, but also who ultimately benefited from it.

The tax authorities’ focus is no longer limited to traditional cases of undeclared income. Transfers between relatives, parental gifts, donations and transactions carried out through joint bank accounts are increasingly being reviewed. Auditors are looking for cases where an apparently routine banking transaction may in fact conceal a transfer of assets that should have been declared differently.

A typical example is a case examined by Greece’s Dispute Resolution Directorate, which involved the transfer of €240,000 from a joint family account held by two parents and their two children to a new joint account held by the son and his wife.

The tax authorities ruled that the transfer constituted an informal donation. Their decision was based on the fact that there was no evidence that the son had contributed to the balance of the original account, while after the transfer the money was made available exclusively to him and his wife. The taxpayer’s appeal was rejected.

The case serves as a warning that being named as a joint account holder does not automatically mean having a right to the full balance of the account. For the tax authorities, the decisive factors are who deposited the money, who built up the balance and who ultimately used the funds.

If auditors find that a joint account holder did not contribute to the accumulation of the money but used it for their own benefit, the transaction may be classified as a gift and taxed accordingly.

According to AADE’s plans, 1,080 cases involving monetary parental gifts and donations are due to be audited this year. The focus is mainly on cases where there are signs that taxpayers may have tried to circumvent the €800,000 tax-free threshold or transfer money through relatives in order to avoid tax liabilities.

Under the current favourable tax regime, financial gifts and donations of up to €800,000 to first-degree relatives, including parents, children, spouses, grandparents and grandchildren, are exempt from tax. However, the exemption applies only when the transaction is carried out through the banking system and is properly declared to the tax authorities.

This is also where one of the main traps lies. If the bank does not confirm the transaction, or if the taxpayer fails to provide the required supporting documents, the tax authorities may refuse to recognise the exemption. In that case, tax is charged from the first euro, at rates of 10%, 20% or even 40%, depending on the degree of kinship between the people involved.

Special attention is also needed for parental gifts made in cash. Although many people regard them as a simple family arrangement, the law provides that when money is transferred outside the banking system, the tax exemption is lost and a 10% tax is imposed from the first euro.

Successive money transfers between relatives are also being examined. Auditors are reviewing cases in which a sum passes through several people before reaching the final recipient, to determine whether individuals who are not entitled to tax exemptions are attempting to benefit from them indirectly. When such a practice is proven, tax may be imposed without recognising the tax-free allowance.

Small money transfers for everyday needs, however, do not usually create tax issues. For example, sending modest amounts through IRIS, Greece’s instant payment system, from parents to children for pocket money or daily expenses is generally not treated as a gift and does not require a tax return, especially when the recipients are dependants.