12. Gift Tax in France
- Definition of a 'Gift'
- Liability to Gift Tax
- Rates of French Gift Tax
- Gifts of Real Estate in France
- Gifts & Inheritance Tax
- Procedures for Declaring Gifts
12.6.1 Procedure for Declaring Gifts in France
There is no doubt a strong temptation amongst donors and donees alike not to declare a gift. Many gifts are made precisely to avoid taxes and entrenched inheritance rights!
The concealment is made doubly tempting by the fact that it is not always easy for the tax authority to establish a full and proper record of gifts made during a lifetime (other than real estate) unless they are declared at the time they are made or uncovered as part of a tax investigation.
However, if you do not declare the gift, and it is later discovered by the tax authority, your inheritors risk losing the tax allowance that would have otherwise applied.
That said, it is highly unlikely the tax authority are going to demand sight of bank accounts that go back over many years!
The greater risk is that the gift would be discovered as part of a tax investigation, but once again, for most households such an investigation is unlikely.
The tax authority do provide an incentive for gifts to be declared, as if the gift is over €15,000 and it is declared to the authorities then you can by option, defer the payment of any gift tax until the death of the donor, when it would then be paid as part of the inheritance.
Remember also, as we stated in the section 1, not all gifts come within the scope of gifts tax, for presents given on birthdays and other celebrations are exempt.
In addition, subsistence support (called pension alimentaire), although not considered to be a gift, needs to be declared by the beneficiary on their French income tax return (if they are resident), and by the person giving the support if they wish to obtain tax relief on the payment(s). You can read more at Tax Allowances to Dependants.
Be aware also that French banks are under an obligation to notify the tax authority of unusual movements of funds, a rule that also applies to professional advisors, such as lawyers and accountants.
Accordingly, in order to avoid disputes between inheritors or with the tax authority you may consider it in the interests of all parties that the act is properly recorded and declared.
Specific procedures are as follows:
i. Money, Shares, Antiques Etc
Where a gift is not part of the normal lifestyle of the beneficiary they are formally required to declare gifts of money, antiques etc to the tax authority.
The obligation applies, notwithstanding that gifts tax may not be payable.
Where the amount of the gift of money (or equivalent) is greater than €15,000 as part of this process you can opt to pay any taxes that may be due following the death of the donor.
If the gift sum is less than €15,000 the declaration needs to be made by the beneficiary, using the form Déclaration de don manuel.
If greater than €15,000, with option to pay taxes due, it should be made using the form Révélation de Don Manuel.
Since 1st July 2021 the process can be undertaken on-line at Impots.gouv.fr . You will need an account on the website, when you then go to ' Votre espace particulier > Déclarer > Vous avez reçu un don ? Déclarez-le'.
The service will automatically calculate the amount of gifts tax payable. Nevertheless, if tax is payable, you will need to print off the form and send it to the tax office, together with a cheque for the amount payable.
You need to make clear on the form whether you are making use of any gift tax allowance to which you may be entitled, for which provision is made on the form.
The declaration should be made within a month of receipt of the gift. No penalties apply if it is not done, although the gift may later be taken into consideration at the time of an inheritance.
If you proceed via a notaire, then they will deal with the declaration formalities, and payment of any tax that may be due.
ii. Inheritance Planning
A notaire must be used in relation to two inheritance planning procedures:
- Donation Entre Epoux - a particular kind of gift procedure between man and wife.
- Donation-Partage - the division of family assets made as part of the inheritance planning process.
In addition, in making a gift, if you wish to favour one inheritor over another (from that part of the estate freely disposable under French laws), then it may well be best that this is properly recorded. Such a gift is called la donation hors part successorale and is best made in front of a notaire.
iii. Real Estate
In relation to gifts involving the transfer of real estate it is necessary to proceed through a notaire, and such gifts will automatically be notified to the tax authority by the notaire.
Stampt duty taxes and fees are payable, which are around 2.5% of the value of the property.
12.6.2 Notaire Fees
If you are obliged, or you deem it desirable, to use a notaire then fees will be payable.
The level of the fees depend on the type of gift being made and to whom. The application of the rates is fearsomely complex and overcharging is common-place. You need to quiz your notaire about them.
The notaire fees for making a gift between man and wife - Donation Entre Epoux - is fixed by law at €115 (2022/23), in addition to which there will be certain administrative charges.
Other fees are a percentage of the value of the gift. They are applied on a 'sliced' basis for each part of the total sum.
With gifts made by two persons (say, mother and father to child) the value of the gift is divided between them for determination of the amount payable.
In relation to the gift of money, shares and intangible objects between ascendants and descendants or other persons the fees (2022/23) are:
|Less than €6,500||2.367%|
|€6,500 - €17,000||0.976%|
|€17,000 - €60,000||0.651%|
|More than €60,000||0.488%|
In relation to the gift of real estate and other tangible objects between ascendants and descendants or other persons the fees (2022/23) are:
|Less than €6,500||4,93%|
|€6,500 - €17,000||2.03%|
|€17,000 - €60,000||1.36%|
|More than €60,000||1.02%|
If you gift the reversionary interest (nue-propriété) in real estate, but retain the life interest (usufruit), the fees are calculated on the full freehold (pleine propriété) value.
The fees that apply to a Donation-Partage are the same as for the gift of real property.
NB: VAT at the rate of 20% applies to all of these rates, which significantly pushes up the amount payable.
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