Debt forgiveness without gift tax: the importance of an agreement

Short answer: a debt waiver does not always result in gift tax. The Tax and Customs Administration only levies gift tax if a gift is involved, and for that, generosity must be at play. If you waive a debt for business reasons (for example, to keep a client afloat) or because the debtor is demonstrably unable to pay the claim, that generosity is often lacking. In that case, a written waiver agreement is your most important piece of evidence to substantiate that business rationale and avoid gift tax.

When is a waiver a gift?

Whether a waiver counts as a gift for tax purposes depends on three characteristics that must occur together:

• Impoverishment of the one who forgives;
• Enrichment of the person whose debt is forgiven;
• Generosity: the conscious intention to benefit the other.

The first two are almost always present in a debt forgiveness. It therefore revolves around generosity. Between father and daughter, generosity is a given, but in a business context, it often is not. Anyone who forgives a debt with a commercial goal in mind is acting not out of generosity but out of self-interest. And without generosity, there is no gift, and therefore no gift tax.

The limit with gift tax

Exemptions apply to ordinary gifts. For instance, parents may gift their child an exempt amount annually (several thousand euros in 2026), and higher exemptions exist for gifts between family members. In principle, gift tax is payable above these limits. Do you want to know which amounts and exemptions apply to a specific case? Always consult the current figures from the Tax and Customs Administration or your advisor, as these amounts are adjusted annually.

Waiver for business reasons

In practice, debt forgiveness is often not granted out of generosity at all. A few common examples:

• Saving a customer. A customer in financial distress cannot place new orders. By writing off part of the outstanding debt, you maintain the relationship and protect your future revenue.
• Settling a dispute. In the event of a payment dispute, waiving part of the claim can be cheaper than lengthy proceedings.
• Cleaning up an uncollectible debt. A debt that you would never fully collect anyway only costs time and administration.

In all these cases, you are acting out of a business interest, not with the desire to benefit the other party. That is precisely the difference that determines whether the tax authorities may levy taxes.

Waiver in case of inability to pay

The law also takes into account the situation in which the debtor is simply unable to repay the debt. If you can demonstrate that the claim was (wholly or partially) uncollectible at the time of the waiver, gift tax will in principle not be levied. To determine this, the Tax and Customs Administration examines the debtor's financial situation at the time of the waiver.

The reasoning is logical: had you not forgiven the debt, you would have had to write down the claim anyway. What is uncollectible no longer has any value, and whoever makes no gift cannot be liable for gift tax.

Pay close attention to the limit. The fact that a debtor cannot pay the full claim does not automatically mean that you may forgive the entire amount tax-free. Only the portion that is demonstrably uncollectible falls outside the scope of the gift. The portion that the debtor could still have paid can nevertheless be classified as a gift. A substantiated calculation is essential in this regard.

Tip: Have a financial specialist substantiate the uncollectibility and, if necessary, consult with the tax inspector in advance. This will prevent an additional assessment afterwards and a dispute that you could have avoided.

Why a waiver agreement is indispensable

In theory, a waiver can also be granted verbally. Do not do that. A written waiver agreement records in black and white what you have agreed to and why, and provides you with proof on multiple fronts:

• In relation to the tax authorities. The agreement substantiates the business reason or the uncollectibility, so that you can demonstrate that there was no generosity.
• The reference date. The date of the agreement determines when the financial situation is assessed. Without a fixed date, you are in a weaker position.
• VAT refund. When writing down a receivable, you may have paid too much VAT. The agreement then serves as substantiation for a refund.
• Clarity for the debtor. What is recorded is recorded; this prevents discussion about what has and has not been forgiven.

Are you unsure whether debt forgiveness is the right route, or whether a payment arrangement or collection is a smarter choice? Then also check out our page on collection before you definitively let go of a claim.

Step-by-step plan: how to safely forgive debt

1. Determine the purpose of the waiver (business interest or uncollectibility) and clearly document this.
2. Make a detailed calculation of the amount that is actually uncollectible or justifiable on a business basis.
3. Draft a waiver agreement including date, amount, and substantiation.
4. If in doubt, consult your advisor or the tax inspector in advance
5. Keep the documents for a potential VAT refund and for your records.

Frequently asked questions about remission and gift tax

Do you always have to pay gift tax on a waiver?

No. Gift tax is only applicable if the waiver qualifies as a gift, and that requires generosity. In the case of a commercial waiver or a demonstrably uncollectible debt, that generosity is usually lacking, meaning no gift tax is due.

Can I also forgive a debt verbally?

Legally, that is possible, but it is strongly advised against. Without a written agreement, you lack proof of the reason, the date, and the amount. It is precisely this proof that you need for the Tax Authorities and for any potential VAT refund.

What if the debtor can only pay a part?

In that case, you may only forgive the tax-free portion that is demonstrably uncollectible. The portion that the debtor could still have paid may nevertheless be considered a gift. A substantiated calculation prevents disputes.

Does a waiver have consequences for VAT?

Possibly. If you write down a receivable, in many cases you have paid too much VAT and can claim a refund. The waiver agreement serves as the supporting documentation for this. Have this assessed by a specialist.

Who can help me with a waiver?

A legal expert drafts a watertight waiver agreement and monitors tax considerations, often in consultation with a tax specialist. This prevents an additional tax assessment afterwards.

Need help with a waiver agreement?

Do you want to forgive a debt without unexpected gift tax? MKB Juristen drafts a clear debt forgiveness agreement for you and helps you consider the tax implications. Also, view our legal assistance for entrepreneurs or schedule a no-obligation intake directly. We would be happy to explain what is sensible in your situation.