Is it necessary to pay tax on a car donation agreement?

The procedure associated with donating a vehicle is quite often carried out between close relatives.

Very often, cars are passed from husband to wife, from grandparents to grandchildren, and also from parents to children. Despite this, the law does not prohibit giving a vehicle as a gift to a person who is not related to the donor by family ties.

Many donors are interested in what kind of car gift tax is provided in this case . Yes, you will have to pay, but more about this later in the article.

First of all, you should familiarize yourself with the information regarding the donation process itself and the execution of the contract.

In the process of registering a deed of gift for a car, the recipient does not provide anything in return, that is, he must not take money, any property, or charge for services.

Failure to comply with this rule may result in the gift agreement being declared invalid.

The essence of giving

A deed of gift for a vehicle is an important document for the new owner of a car . Based on it, he will be able to carry out all necessary financial transactions without the participation of the previous owner.

It is for this reason that the gift agreement, as a standard document, must be certified by a notary.

After all the necessary documents have been prepared, all the nuances have been agreed upon, a contract that is competent from a legal point of view is drawn up.

The following points should be indicated in his body:

passport details of all parties;
information about the vehicle;
vehicle registration certificate number;
date of the transaction;
date and signatures of the donor and guarantor.

The process of drawing up an official contract for the gift of a car without papers confirming ownership of the vehicle will not be possible.

The main supporting document is the legal registration certificate of the vehicle.

A contract for donating a car to a loved one must be carried out based on a certain sequence of actions.

Initially, the car is removed from the official register with the traffic police, then an agreement is drawn up indicating information about the car, as well as contact information and details of all parties.

After signing the contract, the new owner registers the car, and this will need to be done within 120 hours from the signing and certification of the document.

The process of certifying a gift agreement does not fall into the category of necessary actions. This is done just in case, so that if necessary, all issues that arise can be quickly resolved.

To carry out certification, both parties to the transaction must provide passports and a vehicle registration document. As an addition, you can issue a certificate indicating the cost of the vehicle.

This paper can be provided by modern insurance companies, as well as organizations that specialize in providing professional technical servicing of cars. Such a company must have a special license to conduct such processes.

How does the process of creating a deed of gift for a vehicle between immediate relatives take place?

An agreement between the closest relatives is signed in several possible ways. The current laws of the Russian Federation offer the population the following options to choose from:

An oral agreement with the purchase of a new car for the donee. This option is not particularly profitable, since an oral agreement can hardly be called a gift agreement. In addition, if something happens, it will be difficult to prove the fact of donating a car in court.
Independent creation of a gift agreement registered in Rosreestr.
Registration of a deed of gift for a vehicle through a notary.

Each citizen decides for himself which method of registering a gift agreement to use. Experts do not advise entering into an agreement verbally to avoid problems in the future.

Is it necessary to engage a notary to create a document confirming the donation of a car to a close relative?

Donating a vehicle to a close relative is considered a fairly important point that is of a legal nature. It is for this reason that the donor has to carefully study the specifics of concluding a transaction.

In the situation of registering a deed of gift for a car, the presence of a notary is not necessary. In this case, citizens can independently carry out the donation procedure.

However, to ensure that all clauses of the contract are filled out correctly, it is still worth contacting a notary. In addition, this is what will help you conclude a safe transaction.

How to complete an agreement to donate a vehicle to a close relative on your own?

To issue a deed of gift for a car to a close relative without the presence of a notary, the donor must:

Prepare a detailed deed of gift.
Collect all documentation for registering the transaction.
Pay the state fee for the contract.
Seal the deed of gift with signatures in Rosreestr.
Carry out re-registration of ownership rights.

There is nothing complicated in the donation procedure, however, many citizens prefer to formalize everything through a notary because they want to protect themselves from possible problems.

car donation agreement without the participation of a notary

How is a vehicle donation agreement drawn up through a notary?

This method is almost no different from drawing up a deed of gift yourself. An agreement to donate a car to a close relative is signed by the parties directly at the notary.

In order for this task to be realized, it is necessary:

Collect all documentation.
Write a deed of gift describing details of the subject of the gift and other features of the agreement.
Pay the state fee.
Pay for notary services.
After this, with the prepared documents, both parties will need to contact a notary to sign the agreement.
Take a copy of the gift agreement certified by a notary.

After completing the registration of the deed of gift, the donee must register the ownership of the vehicle.

car donation agreement with the participation of a notary

In what cases do you resort to donation?

Only its direct owner, as well as a person who has a notarized general power of attorney, has the right to donate a car.

A car can be donated by an individual or an organization. In this case, only an individual can be gifted.

The process of transferring a vehicle through a gift must be registered with government agencies; in addition, such a transaction is regulated by modern tax legislation.

It states that a donated car is a certain profit that must be taxed.

One of the most common options for transferring a car is to sell it, but in certain cases the vehicle can be donated.

Quite often this happens based on the following goals:

there is no desire to deal with the preparation of a will;
I want to reduce the cost and simplify the process of entering into an inheritance. This is an ideal opportunity to deprive other applicants of the right to posthumous possession of property;
the gift is made to parents in order to avoid division of property during divorce;
one of the spouses has debts.

According to modern legislation, if the value of the gift is more than 3,000 rubles, which directly applies to cars, you will need to pay tax in certain cases and be sure to draw up a written agreement.

When is giving beneficial?

Only the person who is its owner at the given moment in time can give a car as a gift. The exception is a person to whom the owner has issued a general power of attorney, confirmed by a notary office, that is, having legal force.

In what situations is it beneficial to give a car as a gift?

A gift can be received not only from a person, but also on behalf of a legal or individual entrepreneur, in other words, from a company. However, such an expensive gift can only be given to a person.

Registration of transport acting as a gift is carried out directly with state authorities. The regulation of some aspects of the transaction is carried out with the direct participation of tax-related legislative acts, from which the following statement can be gleaned: a car received as a gift under a gratuitous transfer agreement is profit, which, in turn, according to the tax legislation of our country, is subject to tax levies in benefit of the state treasury.

Most often, cars are not given for free, but are sold, however, in many cases the decision on a gratuitous gift is made based on the following nuances:

for example, an elderly relative does not want to carry out the procedure for drawing up a will, and, saving time, gives his loved ones a car (this method is also used when there is no time or energy to draw up a will, but you want to protect the property from everyone who wants to get it for the sake of one person );
a gift is often formalized by parents for their own child who is married, since the donated property cannot be divided during a divorce;
if one of the spouses has debts during marriage, they give it in the name of the other so that it is not possible to take the car as payment for the debt.

Tax - is it paid or not?

Whether a gift of a car is taxable depends on certain circumstances. In particular, the presence or absence of kinship between the two participants in the gift transaction matters.

If there is no relationship between the donor and the recipient, if the person received a vehicle as a gift, he will need to report to the tax organization and submit a declaration there.

Next year you will have to pay a tax to the state treasury in the amount of 13% of the market value of the gift.

If the gift is made between close relatives, the deed of gift will not be taxed. Such participants include:

Spouses.
Parents and adoptive parents.
Grandfathers and grandmothers.
Grandchildren.
Adopted and natural children.
Sisters and brothers, both full and half.

Uncles, aunts, nephews, cousins do not fall under this condition. They pay tax on a general basis.

In the process of registering a deed of gift to the traffic police when registering a car, you will need to provide documents confirming the relationship. This may include a standard marriage certificate, personal passports, and children's certificates.

Who can you give a car to?

Russian legislation does not limit the persons to whom you can donate your property. In this regard, you can give a car to anyone. However, the car gift tax depends on whether you gift your vehicle to close relatives or not.

A gift agreement with close relatives is not subject to taxation. To confirm the relationship, the notary may ask for relevant documents. Passport, birth certificate, marriage certificate and more.

Close relatives include:

Husband or wife;
Parents or adoptive parents;
Children, including adopted children;
Grandparents;
Grandchildren;
Sisters and brothers (siblings and half-siblings).

Uncles and aunts, as well as nephews and more distant relatives, do not qualify as persons who are not subject to taxation when gifting a car.

Persons who received a car as a gift without family ties to the donor must submit a 3-NDFL tax return and pay tax on the market value of the car to the budget. The declaration is submitted for the year in which the transaction was made.

The income tax rate is 13%. In this case, the car received as a gift is equal to the profit of the individual.

If the car is owned for less than three years

Close relatives will also have to pay tax if they decide to sell a car that has been owned for less than 3 years.

Tax on a gift of a car will not be charged until 36 months have passed from the date of taking ownership.

If you need to sell a car urgently, paying tax cannot be avoided, but there are a couple of methods on how to reduce the amount of accrued tax.

Using a tax deduction

The recipient, who decided to sell the vehicle earlier than this time period, can use the standard property deduction, which currently amounts to 250 thousand rubles, to reduce his expenses.

In other words, if a person who received a car as a gift sells it before three years and at a cost of more than 250,000 rubles, then from the difference received from the sale amount and deduction, he will pay 13% to the state treasury.

To understand whether you need to pay tax under a car gift agreement and how it will be calculated in such a situation, it is worth considering the following situation.

For example, a father gave his car to his son in 2021, and the son decided to sell it the next year for 1,300,000 rubles. The son has the right to use a tax deduction, that is, pay tax on the difference of 1,300,000 - 250,000) * 13% = 136,500 rubles.

Decrease in profit received

If you need to reduce the tax on the gift of a car between relatives, you can go by reducing the profit received from the sale at the expense of expenses that were incurred during the operation of the car.

This may be a waste of money on car repairs, as well as on its improvement. In this situation, all additional expenses must be confirmed by receipts and checks.

The tax here is paid on the difference between the profit received from the sale of the car and the expenses incurred.

If, as a result of calculations, it turns out that the funds invested in the car significantly exceed the profit, the owner will be completely exempt from paying tax.

When is tax paid?

According to tax legislation, if the price of a gift transferred from a person or company to another person is more than 4 thousand Russian rubles, then an obligation to pay a tax fee arises.

When does a tax liability arise?

However, in fact, whether a gift will be subject to personal income tax or not will be determined by certain accompanying circumstances.

Circumstance 1. First of all, we are talking about the presence of a relationship between the donor and the recipient, as well as the degree of its closeness. So, if these two persons are not relatives, then you will need to not only submit reports to the tax service, but also pay a fee.

We would like to clarify one very important point: the payer of personal income tax in the case of receiving a car as a gift is the recipient. The donor does not have any obligations to pay the tax fee to the treasury and prepare the relevant declaration documents.

Payment of the tax fee to the state treasury is made the next year after the twelve-month period in which the gratuitous transfer of property took place. Its value will be 13% of the cost of the vehicle specified in the contract.

Circumstance 2. If a gift is given to a person by a relative specified in the list of the Family Code of the Russian Federation, then the received vehicle will not be taxed.

However, liberation will bring a gift received not from every relative, but only from a close one. This category primarily includes:

parents who are biological or adoptive to the recipient;
grandparents of the recipient;
grandchildren and granddaughters of the recipient;
husband or wife of the named person;
sons and daughters, also biological or adopted into the family;
brothers and sisters are also included in this category, and they may have two common parents or only one with the recipient.

As you can see, the state decided to make its own adjustments to the familiar concept of “close relative”. Representatives of law enforcement did not include in the list the following subjects, relationships with which in everyday life also fall into the category of rather close and family ones:

uncles and aunts, relatives, or spouses of relatives do not fall into the category of recipients and donors, with whom family ties help to be exempt from paying taxes;
cousins also cannot receive or give a gift without paying or avoiding tax;
nephews and nieces are another category of seemingly closest people, however, the legislative list of family ties suitable for tax exemption when donating a car does not include it.

In order to register a car received as a gift with the State Road Safety Inspectorate, the recipient will have to demonstrate a document confirming the degree of blood or relationship to the donor:

for spouses, this confirmation will be a marriage certificate, which is issued by the civil registry office;
if the donor is your parent or child, you must attach passport details and a copy of the birth certificate;
for grandparents the order remains the same as for parents;
brothers and sisters also enclose birth certificates and passport data.

If the parents are not biological, then it will be necessary to provide not only passport data, but also attach documents on the adoption of the child as confirmation of the right to donate a vehicle and tax exemption.

If your marriage is civil and has not previously been registered with the registry office, we recommend that you postpone the procedure for donating a car, or carry it out in the name of a close relative, otherwise you will have to pay the full amount of tax to the state treasury. This is because only the officially completed fact of marriage registration matters to the state, otherwise your spouse is legally a stranger to you.

Note! If you received a car as a gift from relatives, but decide to sell it before the period of three years has expired, then you will still have to pay personal income tax, as this is required by the tax legislation of the Russian Federation. This period of 36 months is called the minimum deadline. It is installed not only for cars, but also for residential properties, for example. This is done to prevent fraud.

If you still urgently need to sell the car, you will not be able to avoid paying to the state budget, but you will be able to reduce the amount of the accrued tax levy.

To do this, you will have to take advantage of the property deduction, the value of which in 2021 is 250 thousand Russian rubles

What exactly is a tax deduction? In fact, this is the amount by which the taxable financial base can be reduced. In this case, this base will be the cost of the car for which you sell it. To officially reduce it, you have 250 thousand rubles. No, they will not return to your hands, as is the case with the sale of an apartment, but will only allow you to reduce the amount of deductions due to the budget.

We talk in detail about the tax deduction when buying a car in our special article.

In other words, if a taxpayer who received a car from relatives or strangers as a gift decides to sell it before 36 months have passed from the date of receipt of the gift and registration of the car as ownership, he will have to share 13% of his own profits with the state system. However, if there is an unused tax deduction, the tax calculation process will be carried out differently than in a normal situation. Let's look at how with the help of an example.

Imagine that you are the parent of an adult son, and you decided to give him a nice car for his next birthday. My son will complete the car registration procedure in 2021. Without waiting for the three-year period to expire, he decides to sell the car next year, 2021, indicating the sale price of 1 million 300 thousand Russian rubles.

The young man has the right to receive a tax deduction of 250 thousand, therefore, the amount of the tax fee will need to be calculated from the difference between the sale price and the “body” of the deduction. It turns out the following: (1,300,000-250) * 13% = 136 thousand 500 Russian rubles.

If your son had not applied the specified deduction, he would have had to pay much more, namely 169 thousand rubles (1,300,000 * 13%).

The difference seems small, however, it is significant, because for some it is one or even two monthly salaries

There is another way to reduce the amount of tax collection - to provide evidence of the costs incurred to equip the car. These costs primarily include repair procedures associated with restoring the vehicle to working condition. In a normal situation, you can also write down the costs associated with its acquisition as expenses, however, since in the situation we are considering the gifted car does not buy, but receives for free, he did not make these costs, and therefore cannot compensate for them.

In this situation, it will be more profitable to use a property deduction, however, if you have already sold a car this year and have exhausted it, you will have to compensate part of the tax amount, confirming the costs incurred, if any, using payment and other documents, for example:

receipts;
bills;
checks;
other payment papers.

If, after the transfer, the car was owned for three years, and is sold only after their expiration, the tax fee will not have to be paid upon its sale either to relatives or to people who are not related by blood to the donors. Please note that 3 years is not a calendar period, but 36 months, lasting from the moment you receive ownership of the car. If 35 months and 29 days pass and you sell the car, you will have to give the state part of the money received for it.

You can find out the exact date of receipt of the car by looking at the deed of gift. The number indicated in it is the date on which the countdown started. It doesn’t matter when you registered with the State Road Safety Inspectorate, this does not have any effect on the previously described rule.

More than three years of ownership

If the vehicle, which came into possession on the basis of a gift, was directly owned for more than 3 years, the tax on gifting the car to a non-relative will not have to be paid. This rule is not influenced by the amount of the sale or any other factors.

The only thing you need to pay attention to is that the period of three years is not an abstract calendar year, but exactly 36 months, that is, the exact time of ownership of the vehicle begins in any month of the year.

To accurately determine it, you will need to look into the gift agreement . Ownership of a car begins on the date specified in the donation agreement. The time of delivery of the car for registration with the traffic police does not affect this period.

Paying taxes - important points

If, based on the above factors, it becomes clear that you will still have to pay tax, it is worth familiarizing yourself with some important points regarding this process.

Tax payment can be made in different ways:

You can personally contact your local tax office.
It is possible to send your tax return by certified registered mail.
The declaration can be filled out and sent through the official website of the Federal Tax Service of the Russian Federation.

There is a special section on the official website of the tax service where you can visit the document to fill it out correctly.

If you decide to visit the tax office in person, you will need to take the following documents with you:

personal passport of a Russian citizen;
TIN;
technical passport of the vehicle;
completed declaration;
gift and sale agreement.

After the tax organization employee has examined all the submitted documents, he will issue a receipt for subsequent tax payment with the exact amount of tax.

The completed declaration indicates the property that was received as a gift, as well as its value. The price is usually specified in the gift deed, and if there is not, the tax will be calculated based on the market price.

It is strongly recommended not to underestimate the value, since the tax inspector is authorized to carry out an audit . If an understatement is discovered, you will have to pay not only tax, but an actual fine, penalties and arrears in the amount of the difference.

In order not to make a mistake in the process of filling out the declaration, so as not to accidentally enter all the necessary data, it is worth contacting tax service consultants with all questions or entrusting the process of filling out the document to a commercial organization that provides the relevant services.

If an individual received a car as a gift from a certain company or organization, he will not have to visit the tax office and file a return.

As an ordinary tax agent, the enterprise is obliged to independently determine the total tax base and withhold tax from the price of the donated vehicle.

The time for filing the declaration is April 30 of the year immediately following the year in which the car was transferred under a gift deed . After this, a receipt will be sent to the payer’s address, on the basis of which the tax will need to be paid by November 1.

Delay in this case is unacceptable. Literally the next day, the accrual of fines and penalties for non-payment will begin.