Many people want to help a close friend financially or give money as a gift for special occasions such as birthdays, weddings, anniversaries, or other celebrations. A common question is: How much money can you gift to friends tax-free? The answer depends on Germany's gift tax laws. Unlike close family members, friends are entitled to a much lower tax-free allowance. Understanding the legal rules can help you avoid unexpected tax liabilities and ensure your gift complies with German tax regulations.
In this guide, you'll learn about the tax-free gift allowance for friends, German gift tax (Schenkungssteuer), and how to plan larger financial gifts efficiently.
Under Germany's Inheritance and Gift Tax Act, friends are not considered close relatives for tax purposes. As a result, the tax-free allowance for gifts to friends is only €20,000.
This means:
You can gift a friend up to €20,000 tax-free within a ten-year period.
Gift tax only becomes applicable if the total value of all gifts to the same friend exceeds this allowance during those ten years.
After the ten-year period expires, the tax-free allowance resets and can be used again.
This allowance applies regardless of whether the gift is made in cash, via bank transfer, or in the form of other assets.
If your gift exceeds the €20,000 exemption, only the amount above the allowance is subject to gift tax—not the entire gift.
Suppose you gift your friend €35,000.
Total gift amount: €35,000
Tax-free allowance: €20,000
Taxable amount: €15,000
Only the €15,000 exceeding the allowance is used to calculate the applicable gift tax.
For tax purposes, friends fall under Tax Class III, which has the highest gift tax rates compared to spouses, children, and other close relatives.
Depending on the taxable amount, the gift tax rate can range from 30% to 50%.
The larger the gift, the higher the potential tax burden. Therefore, planning significant financial gifts in advance can help minimize unnecessary taxes.
Yes. The €20,000 allowance applies to the combined value of all gifts made between the same donor and recipient within a ten-year period.
2026: €8,000
2028: €5,000
2032: €7,000
The total gifted amount is €20,000, which remains completely tax-free.
Any additional gifts within the same ten-year period may become subject to gift tax.
In Germany, gifts may need to be reported to the responsible tax office if they are relevant for tax purposes. Financial institutions may also report larger transfers to the authorities.
Even when no tax is ultimately due, notifying the tax office may still be required. The tax authorities will determine whether the tax-free allowance has been exceeded and whether gift tax must be paid.
Yes. If you intend to transfer larger amounts of wealth, careful planning can help reduce your tax liability.
Common strategies include:
Taking advantage of the €20,000 allowance every ten years.
Splitting larger gifts over multiple periods.
Seeking professional tax advice before making substantial gifts.
Keeping proper records of all gifts and transfers.
With thoughtful planning, many people can legally reduce or even avoid unnecessary gift tax.
Yes. Since this amount is below the €20,000 tax-free allowance, it is generally exempt from gift tax.
Yes. However, only the first €20,000 is tax-free. The remaining €30,000 may be subject to German gift tax.
Yes. Every friend has a separate €20,000 tax-free allowance from each individual donor over a ten-year period.
If you plan to gift money to a friend in Germany, it is important to understand the €20,000 tax-free allowance available every ten years. Gifts up to this limit are generally exempt from German gift tax. If you exceed the allowance, only the amount above €20,000 becomes taxable. Since friends fall under Tax Class III, gift tax rates can be relatively high. Careful financial planning and professional tax advice can help you structure larger gifts efficiently while remaining fully compliant with German tax laws.
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