How to properly on a car donation contract

What is a car gift deed and when do you need one

A deed of gift is a legal document by which one person transfers his or her ownership rights to another for free. If the object of the gift is a car, we are talking about a car gift deed. The law does not require any special form, yet in the case of a car, it is a transfer of an item registered in the road vehicle register, so a written form is an absolute necessity. It is not only proof of the transfer, but also the document on the basis of which the change of ownership in the register takes place.

The donation of a car is typical among family members. Parents often give a car to their child when they reach adulthood or obtain a driving licence. Spouses may transfer vehicles for practical or tax reasons. Similarly, it is common for grandparents to give a car to a grandchild to contribute to the grandchild’s mobility or to make commuting to school or work easier. Although this is a gift within the family, it does not follow that the legal requirements can be neglected. In this case, it is also necessary to have a clearly drawn up car gift deed, because without it the transfer cannot take place.

However, the donation is not limited to the family. You can give a car to a friend, an employee or even to someone with whom you have no close relationship. In such cases, it is all the more important to have everything well documented. Gifting a car can also have tax implications for the donee, especially if it is a higher value car. It is therefore advisable to think of the transfer in a comprehensive way, not just as a formal act.

What elements must be included in a car donation agreement

In order to be valid and applicable, the contract must contain certain information. The first and essential element is the clear identification of the donor and the donee, i.e. name, surname, date of birth and address. In the case of entrepreneurs, a personal identification number shall also be added.

It is also necessary to describe the vehicle itself accurately. It is not enough to state that it is a passenger car of a particular make. The VIN code, type, model, year of manufacture, registration mark and other information on the registration certificate must be completed. In this way, the vehicle cannot be confused with another car of the same type.

An explicit statement that the donor is giving the car to the donee free of charge is an integral part of the donation. It must be absolutely clear that this is a gift and not a purchase or other form of transfer. It must also be stated that the donee accepts the gift. This makes the contract mutual and valid. The law also requires that the gift be physically handed over, which in the case of a vehicle is usually the handing over of the keys and technical documents.

In practice, it is advisable to include some additional information to protect the donor in particular. If the car has certain known defects, it is a good idea to mention them. This will avoid disputes later on as to whether the defect occurred before the donation or afterwards. For older vehicles, it is also advisable to note the approximate odometer reading or general condition. This will prevent any accusations that the donor took over the car in a condition that was not in the actual condition.

How the vehicle is transcribed after donation

The process doesn’t end with the signing of the donation agreement. In order for the transfer to be truly complete, the donor must make a transfer at the vehicle registry. This step is often underestimated, but it is very important because until the car is transcribed, the original owner is still liable for any offences, fines and compulsory liability.

The transcription process takes place at any municipal office of the municipality with extended jurisdiction. The donor must present the donation contract for the car, the roadworthiness certificate, a valid roadworthiness test and proof of the compulsory insurance.

Since 2015, the obligation to carry out the transcription within ten working days of the transfer of ownership applies. If the deadline is not met, the authority may impose a fine of up to CZK 50,000. It is therefore a good idea for both parties to deal with the transfer promptly to avoid unnecessary complications.

Tax implications of car donation

The donation of a car is generally free of tax consequences if it is made within the family. The Czech legal system distinguishes several categories of relatives that are automatically exempt from income tax. This group includes mainly the direct line, i.e. parents, children and grandparents, as well as siblings, spouses and registered partners. If you donate a car to someone in this group, there is no need to report anything to the tax office and the donation is completely tax-free.

The situation is different if you give a car to a person who is not one of these relatives. In this case, the donor may be liable for tax as the car may be considered income. The tax is then calculated on the normal value of the car. It is therefore advisable to take professional advice in such cases, especially if the car is of a higher value. This will avoid later penalties or tax assessments.

The most common mistakes and risks when donating a car

In practice, we often see that people treat car donation as a routine matter and do not worry too much about the formalities. However, they subsequently solve problems that could have been easily avoided. One of the most common mistakes is an incomplete donation contract. People often leave out some details about the vehicle or omit to include a declaration of gratuitousness of the gift or acceptance of the donee. In this case, the registry will refuse to carry out the transcription, which delays the whole process.

Another common mistake is donating a vehicle with defects without describing them in the contract. The donor may later claim that the defect existed at the time of handover and claim compensation. Although legally it is a gift, not a purchase, the courts in some disputed situations may take into account whether the donor acted honestly and provided sufficient information about the condition of the vehicle.

It is also common for the donor to fail to deal with the vehicle’s title in a timely manner. Until the transfer is completed, the original owner is responsible for the vehicle. If the donor commits an offence, parks illegally or causes damage to the car, the authority will look to the donor, not the actual user. This can be very annoying, especially if the donor tries to contact the donee but the donee does not respond.

Donating a car does not automatically cancel the original compulsory insurance. The insurance company will not find out about the change of ownership on its own, you must be reported to it.

When it makes sense to contact a lawyer

Although car gifting usually goes smoothly, there are situations when it is advisable to contact a professional. If the car is of a higher value, it is highly recommended to have a professionally drafted car gift deed. The same applies if there are strained relations between the parties or there is a risk of disagreement later on. A lawyer can check the technical condition of the contract, alert you to potential risks and make sure that the transfer is legally enforceable.

Summary

A car deed of gift is a written document by which the donor transfers ownership of a vehicle to the donee for no consideration, and as it is an item registered on the vehicle register, getting it right is essential for the subsequent transfer. The contract must contain an accurate identification of both parties, a detailed description of the vehicle including the VIN, a clear statement of the donation and acceptance of the gift and it is advisable to include any known defects or roadworthiness to avoid future disputes. After signing the contract, the donor must transfer the vehicle to the registry, present the technical documents, have a valid MOT and have arranged compulsory liability insurance; there is a 10-day deadline for the transfer, failure to comply with which may be penalised. The donation of a car is usually without tax implications if it takes place within the family, but outside the family the donor may pay income tax according to the value of the vehicle. Common mistakes include an incomplete contract, failure to disclose defects, failure to transfer or underestimating the liability of the original owner until the car is transferred on the register. It makes sense to bring in a lawyer, especially for more valuable cars, strained relationships or the risk of future disagreements, to ensure that the car gift deed is legally sound and the transfer goes smoothly.