How do you leave an extra 100,000 Euros to children, grandchildren or great-grandchildren?

Do you qualify for the new  100,000 Euros French Gift Tax incentive?

France has proposed new gift tax incentives to try to encourage families to release more cash into the economy.  These incentives allow a tax free gift of up to 100,000 Euros from parent to child, grandchild or great-grandchild, (formerly these had a 30,000 Euros limit) but must be invested in their small or medium sized businesses, or for construction of their residence. These incentives, if approved, will apply to qualifying gifts made between 15 July 2020 and 31 June 2021.

The UK doesn’t have gift tax, and allows residents to make a gift of any amount to almost any person. The gift is taxable for inheritance tax purposes if the donor does not survive the gift by 7 years.  A UK gift falls out of the estate for inheritance tax if the donor does survive the gift by 7 years. There is a gradual reduction of tax after the third year.

French gifts only fall out of the estate for eventual inheritance tax if the donor survives the gift by 15 full years, with no gradual reduction, and are subject to strict tax allowances and tax rates, depending upon the family relationship, eg a parent can gift a child 100,000 Euros every 15 years. Any gift of property must be registered with a notaire, often incurring fees and duties of around 3%.  If a cash gift is made via a Notaire, the gift tax allowance is increased by an extra 31,865 Euros.  Anything exceeding this tax allowance is immediately taxable on making the gift.  These limits are very restrictive, and a long term gamble with up front costs.

The new incentives are therefore welcome, but of limited scope, and limited usefulness to most families.

Please contact John Kitching john@french.legal for more information, and to discuss the most suitable inheritance tax planning options for French property of UK residents, and for Brits who live in France.

John Kitching

Director

French Law Consultancy Limited