French notaires want to reduce taxation on family gifts

French notaires are asking for a reduction in the tax charged on gifts made during a person’s lifetime.

They say that lower rates could encourage families to pass on wealth earlier, when younger generations may need it most.

In France, gift tax is levied on all larger gifts, at differing rates and with different allowances depending on the recipient, similar to how inheritances are taxed. 

The new proposal was put forward by the 122nd Congrès des notaires de France (French notaires’ professional conference).

It suggests halving gift-tax rates on lifetime gifts of up to €552,324 in the case of gifts made by givers under 75, whether they transfer full ownership or usufruit (the lifetime right to live in or receive rent from a property while someone else retains the residual ownership). 

It would not, however, change existing tax allowances (amounts that can be given before tax is charged) or rules relating to how long it takes for allowances to renew or cease to be accounted for in inheritance tax allowances (15 years).

The aim is to make it less likely that taxation will put people off from making transfers of property. 

Their proposal describes the goal as making tax “a lever for the circulation of wealth rather than a barrier to early transmission”. 

Earlier gifts could help beneficiaries buy or improve a home, finance a professional project, invest or spend the money.

The average heir is now over 50, the notaires said, by which time many people have already bought a home, started a business or established their family life.

Direct-line gifts, after a standard tax-free allowance of €100,000 per parent and per child (renewable every 15 years) are currently taxed using rising bands at 5%, 10%, 15% and 20% (then  30% on any part from €552,324 to €902,838, then 40% up to €1,805,677 and then 45% above this).

The proposal would cut each rate by half, apart from the rates at 30% and above for the largest inheritances. 

For gifts between brothers and sisters, the current rates are 35% on the taxable amount up to €24,430 and 45% above that, after a €15,932 tax-free allowance. The notaires propose also halving these rates to 17.5% and 22.5%.

Gifts to nephews and nieces, currently taxed at 55% after a €7,967 tax-free allowance, would fall to 27.5%.

The proposal would also cover gifts between spouses and civil partners (who currently benefit from an €80,724 tax-free allowance), with the corresponding tax rates also halved. For amounts above €552,324, the existing rates would remain unchanged, as for direct-line heirs. 

For the time being,  the proposal is a recommendation to policymakers, not a change to the current tax rules.