French Property Gifts and Inheritance Tax Allowance

The donation of a property is subject to gift tax in France. The applicable tax rate depends on the relationship between the donor and the recipient.

Lifetime gifts between spouses and civil partners are tax-free up to a current exemption of €80,724. Any amount above this threshold is subject to gift tax. However, gifts made between spouses or civil partners on the death of one of them are fully exempt from tax.

The €80,724 exemption is cumulative over a 15-year period. This means that, when calculating the tax due on a new gift, any previous gifts made by the same donor to the same donee within the past 15 years must be considered. If the total value of gifts exceeds the exemption, gift tax will be payable on the excess.

Gifts Between Spouses or Civil Partners

In France, lifetime gifts between spouses and civil partners are tax-free up to a current exemption of €80,724. Any amount above this threshold is subject to gift tax. However, gifts made between spouses or civil partners on the death of one of them are fully exempt from tax.

Any amount exceeding this threshold is subject to taxation, with progressive rates applied as follows:

• Up to €8,072: 5% tax rate
• €8,073 to €15,932: 10% tax rate
• €15,933 to €31,865: 15% tax rate
• €31,866 to €552,324: 20% tax rate
• €552,325 to €902,838: 30% tax rate
• €902,839 to €1,805,677: 40% tax rate
• Above €1,805,677: 45% tax rate

Gift and Inheritance Tax Allowances for Children

Gifts or inheritances passed to children, whether during a parent’s lifetime or upon death, benefit from a tax-free allowance of €100,000 per child, per parent. This exemption applies to direct descendants. It applies to children but not to stepchildren.

In certain circumstances, it may also apply to inheritances received by grandchildren, for example where their parent (the deceased’s child) has predeceased the deceased, and they inherit directly from their grandparent.

Any amount exceeding this threshold is taxed at progressive rates, as follows:

• Up to €8,072: 5% tax rate
• €8,073 to €12,109: 10% tax rate
• €12,110 to €15,932: 15% tax rate
• €15,933 to €552,324: 20% tax rate
• €552,325 to €902,838: 30% tax rate
• €902,839 to €1,805,677: 40% tax rate
• Above €1,805,677: 45% tax rate

The following rates and exemptions apply to gifts to other recipients:

1 - Tax Rates for Siblings

Gifts to siblings, whether during lifetime or on death, are subject to tax above an exemption of €15,932. The first €24,430 above this threshold is taxed at 35%, with the remainder taxed at 45%.

2 - Tax Rates Nieces and Nephews

Gifts to nieces and nephews, whether during lifetime or on death, are taxable above an exemption of €7,967, with the excess taxed at a flat rate of 55%.

3 - Tax Rates for Grandchildren

Lifetime gifts benefit from specific exemptions of €31,865 for grandchildren and €5,310 for great-grandchildren. Any amount exceeding these allowances is subject to gift tax at the progressive rates applicable to transfers between parents and children, as set out above.

4 - Tax Rates for Unrelated Individuals

Gifts to individuals with no family relationship to the donor (including stepchildren) are subject to gift tax at a flat rate of 60%. Where assets are inherited on death, only a minimal tax-free allowance of €1,594 applies.

5 - Cash Gifts

Cash gifts made outright to a child, grandchild, great-grandchild or, where there are no such descendants, to a nephew or niece, are exempt from gift tax up to a limit of €31,865, provided that both of the following conditions are met:

• The donor is under 80 years of age on the date of the gift; and
• The recipient is either an adult or an emancipated minor on the date of the gift.

Gift and Inheritance Tax Rules in France

All exemptions are subject to the 15-year cumulative rule. This means that, when calculating gift or inheritance tax, any gifts or inheritances received from the same donor within the previous 15 years must be taken into account to determine if the relevant allowance has been exceeded.

Gift tax is ordinarily payable by the recipient (the donee). However, the donor may choose to pay the tax on the donee’s behalf, and such a payment is not treated as an additional taxable gift.

UK Tax Consequences

If the donor is a UK tax resident, UK tax implications must also be considered, in addition to the French gift tax.

UK tax resident donors are generally subject to UK Capital Gains Tax (CGT) on the gift of a French property. This means any increase in the property’s value since acquisition may be taxed at rates of up to 24%. This CGT liability arises on the disposal of the property, even though it is a gift, and applies in addition to the French gift tax. Importantly, no tax credit is available between the UK and France in this scenario to mitigate the double taxation.

When a long-term UK resident makes an outright gift of assets (other than to a spouse), the gift is generally treated as a Potentially Exempt Transfer (PET). This means it will become fully exempt from UK Inheritance Tax (IHT) if the donor survives for seven years from the date of the gift. You are classified as a long-term resident when you have been a UK resident for a total of 10 years or more within the previous 20 tax years.

If the donor dies within seven years, the gift may become subject to IHT at a rate of up to 40%, after applying the nil rate band (currently £325,000). If tax is due, taper relief may reduce the liability, with the tax charge decreasing by 20% for each year the donor survives beyond the third anniversary of the gift.

If UK IHT is payable on a gift that has also been subject to French gift tax, it is generally possible to offset the French tax against the UK liability to avoid double taxation.

For Legal and Tax Advice in France

Our legal specialist, François Mouniélou, along with his team, focuses on taxation, wealth tax, inheritance, and succession. Feel free to reach out to him for more details or to schedule a consultation.

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