Is there a gift tax when a foreigner (not a US Citizen) gives money in amounts greater than $100,000 but less than $5,000,000 to a US citizen (who is unrelated to the donor, not a spouse or decedent)?
My reading of the instructions of Form 709 is that the gift only needs to be reported and a tax paid if the gift is of "tangible property" existing in the United States, and that if the money is of foreign origin then there is no tax due. Is that correct?
This depends on whether the country in question has a gift tax. Canada, for instance, does not. Whereas France applies the following:
And Germany implements this policy:
Inheritance tax is a tax on lifetime gifts and on transfers of value passing on death. This tax is imposed on German residents. An individual who is not resident in Germany is liable to this tax only in relation to their assets situated in Germany.
Progressive tax rates of 7% up to 50% and tax-free amounts between EUR 20,000 and EUR 500,000 apply, depending on the value and the degree of the relationship between donor and beneficiary. For a surviving spouse, an additional tax-free allowance of EUR 256,000 is granted. This allowance is reduced by the discounted value of any pension entitlements, which are not subject to inheritance tax.
In general, the relationship between the individuals, international treaty laws involving double taxation, and currency exchange rates between the country in question and the US apply when making such a transaction.
References
Based on my research most law firms and tax advisors post the same thing on their websites. That is that bank transfers of money is taxable even if the donor is not a resident or citizen because this is considered transfer of tangible property for some odd reason. Though would appreciate if you share anything to contest this.
US person receiving gift exceeding $1000000 in a financial year need to report the same to the IRS in Form 3520.
