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12. Gifts Tax in France
- 12.1 Gifts Tax in France Introduction
- 12.2 Tax Allowances in France
- 12.3 Rates of French Taxation
- 12.4 Gifts of Real Estate in France
- 12.5 Gifts & Inheritance Laws in France
- 12.6 Procedures for Making Gifts within France
12.1. Gifts Tax in France Introduction
A 'gift' is called a donation and the 'gifts tax' called the droits de donation.
The definition of a ‘gift’ for the purposes of the tax excludes those gifts which may ordinarily be made in the course of daily life.
So,for instance, wedding and birthday gifts do not come within the gaze of the French tax authorities, provided the gift is reasonable by the living standards of the donor.
Such a gift may be in the form of cash, but it may equally take the form of the transfer of real estate, e.g. transfer of all or part of the family home to your children.
The government have recently announced a reform of inheritance and gifts taxes, which abolishes inheritance tax between couples, and substantially increases the inheritance and gifts tax allowances for children.
Accordingly, in the future, the use of gifts as a tax planning strategy is going to be less important, simply because of the generous provisions available under inheritance tax rules.
12.2. Tax Allowances in France
Nevertheless, in order to assist with inheritance planning the law grants quite generous tax allowances for gifts made between family members.
These allowances can be used every six years. So a gift made every six years is free of gifts tax, provided it does not exceed the exemption limits. The limits on the amount that can be gifted free of tax depends on the relationship between the parties and, in some cases, on the age of the donor.
The thresholds, are as follows:
Spouses - €76,988 between spouses and those in civil partnership.
Children - €151,950 from each parent to each child (or child to parent).
Grandchildren - €30,390 from each grandparent to each of their grandchildren.
Brother/Sisters - €15,195 to brothers or sisters.
Nieces/Nephews - €7598 to nieces to nephews.
In addition to these allowances, it is also possible to make a cash donation of up to €30,390 to each child or grandchild or, in the absence of these descendants, to a neice or nephew, free of gifts tax. This separate allowance is conditional on the donor being less than 65 years old, and the beneficiary over 18 years old. The gift of the cash must also be declared to the tax authority.
A registered disabled person, whatever their relationship to the deceased, receives an allowance of €151,950 by reason of their disability, to which they can add any other allowance to which they may ordinarily be entitled by virtue of blood link. Thus, a disabled child is entitled to an allowance before gifts tax of €151,950, as well as a further €151,950 from each of their parents.
These allowances are cumulative so that, for instance, a child may receive gifts from both parents and grandparents, without one affecting the exemption limits of the other.
If you are gifting real estate then the situation can be made easier by gifting to your children the 'reversionary interest' in the property, whilst you retain the 'life use' of the property. You can read more about this in section 12.4 on the next page.
12.3. Rates of French Taxation
If the gift is larger than the allowances that are available then the recipient is liable to gifts tax on the value of the gift over the allowance.
The rate of taxation applicable depends on the type of gift, and the donee.
The taxable amount is then reduced by an age allowance, available to the donor.
Gifts benefit from a tax reduction of 50% if the donor is less than 70 years old, and 30% where donor is aged over 70 up to 80 years. The taxable amount is the sum applicable after deductions of the permitted allowance.
In addition, the tax is applied on a 'sliced' basis so that each slice of the total sum is taxed at a different rate.
The rates are as follows:
Table: Gifts Between Parents and Children
| Less than €7600 | 5% |
| €7,600 - €11,400 | 10% |
| €11,400 - €15,000 | 15% |
| €15,000 - €520,000 | 20% |
| €520,000 - €850,000 | 30% |
| €850,001 - €1,700,000 | 35% |
| More than €1,700,000 | 40% |
Table: Gifts Between a Married Couple/Civil Partners
| Less than €7600 | 5% |
| €7,600 - €15,000 | 10% |
| €15,000 - €30,000 | 15% |
| €30,000 - €520,000 | 20% |
| €520,000 - €850,000 | 30% |
| €850,001 - €1,700,000 | 35% |
| More than €1,700,000 | 40% |
Table: Gifts Between Brothers and Sisters
| Less than €23,000 | 35% |
| Greater than €23,000 | 45% |
Others family members are taxed at the rate of 55% and those outside the family at the rate of 60%.
Next: Gifts of Real Estate in France
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Finance & Taxation