On the causes and effects of a broad interpretation of the concepts of “descendants” and “ascendants” in the Inheritance and Donation Tax Act

Abstract

A determination of the affiliation to one of the three tax groups of the taxpayer and the person from whom the acquisition of goods and property rights took place is one of the key elements of inheritance and donation tax, on which the amount of the tax-free amount and tax rates, as well as tax exemptions and reliefs depend on. The classification into the tax group is made according to the personal relation between the acquirer and the person from whom the goods and property rights were acquired. On 27 October 2020 Article 14(4a) – which had been added to the Inheritance and Donation Tax Act – came into effect. According to this law, persons who are or have been in a foster family, in a family foster home, in a care and educational institution, or in a regional care and therapeutic institution, as well as persons forming a foster family, running a family foster home or working with children in a care and educational institution, or in a regional care and therapeutic institution, are deemed to be descendants within the meaning of the Act. This change has addressed, undoubtedly, the welfare of the children and the welfare of the family. However, this socially beneficial change has also produced financial effects for municipalities where inheritance and donation tax constitutes part of their own income. As a result of the amendment of the law, the revenues of municipalities from inheritance and donation tax will inevitably decrease.