Where the money originally came from, how long it stayed in the account, whether it was later transferred on to another relative, and whether the person named as the donor could actually afford to give that amount: these are some of the pieces of the puzzle that AADE, Greece’s Independent Authority for Public Revenue, pieces together when it audits successive donations within a family, looking for cases where an intermediate relative was used simply as a “bridge” to get the money to its real recipient.

The audit does not stop at the declaration of a donation or a parental gift. It follows the trail of the money and cross-references bank account movements with declarations on myProperty, the online property platform, and with figures from annual tax returns. The aim is to establish whether, behind two transactions that are formally separate and tax-exempt, there is in fact a single transfer of money that would have been taxed had it been made directly.

The classic example is money moving from a child to a parent, and then from that same parent to another child. Both transfers fall between Category A relatives, the closest degree of kinship under Greek tax law, covering parents, children and spouses, and can, provided the legal conditions are met, be covered by the tax-free threshold of 800,000 euros. If the audit proves, however, that the real intention from the outset was to move the money from one sibling to the other, the transaction can be treated for tax purposes as a direct donation between siblings, taxed at 20% from the first euro.

AADE has itself clarified that in cases of successive donations, it examines the real circumstances and the intent behind the transactions. The burden of proving that the rules were circumvented rests with the tax authority. Auditors must therefore establish, from the evidence and the actual facts, that the ultimate beneficiary was someone other than the person who initially appeared as the recipient of the donation.

The first trace: bank accounts

Bank account movements are one of the main tools used in the audit. Investigators examine where the sum originated, when it was credited to the first recipient’s account, and whether it was later transferred on to another family member.

Cases in which a sum is credited to one account and then the same or a corresponding amount is transferred to another family member are of particular interest. The question is whether these are two genuinely independent transactions, or whether the first recipient effectively acted as an intermediary.

The second trace: timing

The time gap between the two transfers is an important factor. According to AADE’s guidelines, a short interval, up to around six months, points strongly to circumvention, provided this is also backed up by the rest of the evidence gathered during the audit.

The six-month period is not, however, an automatic rule in either direction. A second donation made within six months does not automatically make it unlawful. Conversely, waiting more than six months is no shield against an audit. If AADE holds specific evidence that the money is essentially the same sum that has gone full circle, it can still argue that circumvention took place even after the six months have passed.

The third trace: the E1 return and myProperty

If the trail cannot be established directly from bank movements or myProperty declarations, there is a second line of cross-checking: annual income tax returns.

Donors record the amounts of donations and parental gifts they have made under codes 725 and 726 of the E1 return, while recipients declare the corresponding sums they have received under codes 781 and 782. This makes it possible to check whether the figures match up and are consistent with the declared donation or parental gift.

The fourth trace: where the donor received the money

Even when the bank transfer and the declaration have both been made correctly, there is a further point that can trigger an audit: whether the person named as the donor actually had the financial means to make the donation.

The tax authority examines whether the sum can be justified by the donor’s declared income and their overall financial position. A taxpayer with limited declared income who suddenly appears to be handing over a particularly large sum may therefore need to prove where the money came from.

The pitfalls of the tax-free threshold

The tax-free threshold of 800,000 euros has applied since 1 October 2021 to donations and parental gifts made to Category A relatives, under the conditions set out in law. For amounts above 800,000 euros, tax is calculated at 10% on the excess.

For cash donations, however, the process matters a great deal. If the conditions for the tax-free threshold are not met, the tax liability can start from the very first euro. And when it emerges that, behind a triangular transaction, the real donor and the ultimate beneficiary in fact belong to a different category of kinship, the tax rate that corresponds to their true relationship applies: 20% on cash donations within Category B, and 40% within Category C.