6.1. Reliefs and Allowances for French Gifts Tax

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.

Nevertheless, in order to assist with inheritance planning the law grants quite generous tax allowances for gifts made between family members.

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 (applicable from Jan 2008), are as follows:

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.