Giving away real estate in France

Gift agreement

German or French gift law?

In the case of an inter vivos gift, the contracting parties can generally choose the applicable law. However, French law must be applied with regard to the transfer of ownership and entry in the property register.

Since the notary and the land registrar usually require a legal opinion on the validity and application of foreign law when a gift is agreed, a choice of law often leads to additional costs and effort.

Form of a gift agreement

The gift of a property must be made in the form of a notarial deed in order to be valid.

French gift tax

If a property is gifted in France, it is subject to French gift tax regardless of whether the donor and donee are resident in France for tax purposes.

Valuation

The taxpayer, i.e. usually the donee, must state the net value of the property in the gift tax return. This is the value that would be realized if the property were sold. As this is only known when the property is sold, there is a certain amount of leeway when declaring the value of a property as a gift in France.

German gift tax

If the donee or donor was resident in Germany for tax purposes, German gift tax may apply in addition to French gift tax.

There has been a double taxation agreement between Germany and France since 2007. In these cases, double taxation can often be avoided or mitigated by offsetting. As a rule, however, French taxation will take precedence. In this case, the French gift tax will exceed the German tax. This means that there is no longer any entitlement to payment of German gift tax in Germany.

Amount and allowances of gift tax

Percentage rates of gift tax

French gift tax uses a progressive system linked to the value of the net assets transferred. This means that only the value of the gift received is taken into account, not the total assets of the donor.

Taxation is as follows:

• Up to € 8,072 = 5 %
• € 8,072 – € 12,109 = 10 %
• € 12,109 – € 15,932 = 15 %
• € 15,932 to € 552,325 = 20 %
• € 552,325 to € 902,838 = 30 %
• € 902,838 to € 1,805,677 = 40 %
• From € 1,805,677 = 45 %

Allowances

French law has hardly any allowances with regard to gift tax. Probably the most important is the allowance of €100,000 for gifts from parents to their children.

The tax relief on the inheritance of companies or shares should also be noted. These can be exempt from tax by up to 75% if the beneficiary also assumes the obligations arising from this inheritance.

Att. Prof. (GTU / Georgien) Dr. phil. Stephan J. Lang