12. Gift Tax in France

1. Definition of a 'Gift'
2. Liability to Gift Tax
3. Rates of French Gift Tax
4. Gifts of Real Estate in France
5. Gifts & French Inheritance Tax
6. Procedures for Declaring Gifts

12.2. Liability to French Gift Tax

i. Residency

In terms of residency, a liability to gift tax may arise depending on the tax resident status of the donor, the tax resident status of the donee, the nature of the gift and its location.

• If the donor is tax resident in France liability arises on all worldwide assets transferred over and above the allowances available.

• If the donor is non-resident, liability arises on all worldwide assets transferred to the donee over the allowances available if the donee has been a tax resident of France for at least six out of the last ten years.

• If both the donor and donee are non-resident, liability arises on the gift of real estate in France.

If the beneficiary is non-resident a liability may also arise in their country of residence.

These rules apply in the absence of an international tax treaty to the contrary, of which there are only a few - Germany, Austria, USA, Italy and Sweden - where the gifts are exempt from taxation from France.

ii. Tax Allowances

In order to assist with inheritance planning French law grants tax allowances for gifts made between family members.

A gift made every 15 years is free of gifts tax, provided it does not exceed the exemption limits.

However, up to 15 years the gift may later become taxable on the death of the donor, as we set out in section Gifts & French Inheritance Laws​.

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 operational in 2022/23 are as follows:

• Spouses/Partners - €80,724 between spouses 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 family gifts in cash (dons familiaux de sommes d'argent) of up to €31,865 to each child, grandchild or great grandchild from each ascendant, or, in the absence of these descendants, to a niece or nephew, free of gifts tax.

So each child has an entitlement from each of their ascendants - parents, grandparents, great-grandparents.

This separate allowance is conditional on the donor being less than 80 years old and the beneficiary over 18 years old.

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.

Thus, parents aged 70 years who gift to their two children a sum of €163,730 each, can make use of the family cash gift allowance, in addition to the general allowance, granting full exemption.

They can also receive the family gifts allowance from their grandparents/great-grandparents. The total gift allowance from grandparents (€63,730) is particularly useful as there is almost no inheritance tax allowance between grandparents and grandchildren. Provided that on your death your grandchildren are not inheritors, this gift is not reintegrated into the inheritance sum total, meaning it remains tax free.

A disabled person, whatever their relationship to the deceased, has an allowance of €159,325 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 €159,325, as well as a further €100,000 from each of their parents.

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 approach in Gifts of Real Estate in France​.

iii. Who Pays?

The donee is liable to pay the tax, but the tax authority do permit the donor to pay, without it affecting the level of the gift, which remains unaffected by this additional gesture.

One way of reducing the amount of gifts tax payable is to reduce the taxable base and for you to pay the gift tax.

Example: If a parent were proposing to gift a child €200,000, but instead gifted them €168,171, on which you paid €31,829 gift tax (totalling €200,000) it reduces the amount of gift tax payable by around €7,000, as your child would otherwise pay €38,195 on a gift of €200,000, leaving them with €161,805.

Next: Rates of French Gifts Tax

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