Paul Flintham, an International Financial Advisor at Beacon Global Wealth Management explains how French Gift Tax works…
In simple terms, with French gift tax the donor makes the gift. The donee receives the gift and is responsible for paying any tax that is due (droits de donation).
If the donor is tax resident in France, tax is payable on all worldwide assets transferred in excess of the allowances available.
If the donor is non-resident, but the donee has been a tax resident of France for at least six out of the last ten years, liability arises on all worldwide assets transferred to the donee in excess of the allowances available.
If both donor and donee are non-resident, tax is payable on the gift of real estate only in France.
The gift free allowances are only for family members and are variable according to the relationship to the donor. The donor must also be under 80 years old, and the donee over 18 for the allowances to apply.
A gift made every 15 years may be made free of gift tax, provided it does not exceed the exemption limits (below). If the donor dies within the 15 years the gift may then incur a tax penalty.
The exemption limits in 2022 are as follows:
- Spouses/Partners – €80,724 between spouses, PACS and those in civil partnership.
- Children – €100,000 from each parent to each child (or child to parent).
- Grandchildren – €31,865 from each grandparent to each of their grandchildren.
- Brother/Sisters – €15,932 to brothers and sisters.
- Nieces/Nephews – €7,967 to nieces and nephews.
In addition to these allowances, it is also possible to make tax-free family gifts in cash (dons familiaux de sommes d’argent) of up to €31,865 to each child, grandchild, or great grandchild from each donor, or, in the absence of these descendants, to a niece or nephew.
These allowances can be cumulative so, for instance, a child may receive gifts from parents, grandparents and great grandparents individually, without one affecting the exemption limits of the other.
Even though a gift may be made tax-free every 15 years, if the donor dies within the 15-year period then the gift is added to the total value of the estate for the calculation of inheritance tax. This process is called the ‘rapport fiscal.’
The child allowances for inheritance tax are the same as those for gift tax. If gifting real estate then the situation can be made easier by applying the ‘reversionary interest’ in the property, whilst the donor retains the ‘life use’ of the property.
If the gifts made are above these exemption limits, then tax is applied rom 5% (less than €8,072 up to 20% (from €15,932 – €552,324).
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This communication is for informational purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Beacon Global Wealth Management are members of Nexus Global (IFA Network). Nexus Global EU is a division of Blacktower Financial Management (Cyprus) Limited (BFMCL) and Blacktower Insurance Agents & Advisors Ltd (BIAAL). Beacon Global Wealth Management is an Appointed Representative of BFMCL which is licensed and regulated by the Cyprus Securities & Exchange Commission (CySEC) – Licence No. 386/20. Beacon Global Wealth Management is an Appointed Representative of BIAAL which is licensed and regulated by the Insurance Companies Control Service (ICCS) – Licence No. 5101