I completely agree with this take. There may be legal ways to achieve the desired long-term outcome while minimizing the tax due.OP's sister needs to get herself along to a tax consultant as a matter of urgency for professional advice on how to put her tax affairs in order.
There is much that we do not know about in relation to the particulars of the specific case.
It occurs to me that it may yet be possible to rescue the situation legally, especially if the benefit has only accrued recently.
For example: does the uncle have any business interests, where is his primary residence, etc.
It's possible OP is mistaken and that only the first €32,500 of the €500k was intended as a gift, with the next €120k intended as a loan at 2.5% (with an annual gift of the €3k interest due), etc.