Authors:
Donation tax: All you need to know about donation tax in France for Non-Residents.
REF: 031:
Donations of movable and immovable property located in France that are made by non-residents are subject to a donation tax on the free transfer of assets. The tax regime that concerns these donations is the same as that of inheritance: the same tax reliefs, tariffs and reductions apply, under certain conditions.
How is donation tax calculated?
They are calculated based on the current market value of the donated goods, that is to say, the price subject to supply and demand as a result of the state in which the goods are, before the donation.
Donation tax applies after:
- The reinstatement of donations that have occurred within the past 15 years to the donor,
- The application of a tax relief (100,000 € in the case of donation to an infant, 15,932 € if donated to a sibling and 7,967 if donated to a niece or nephew),
- The application of a tariff[1], the rate of which depends on the relationship between the donor and the receiver (between ascendants and descendants, between spouses, etc.),
- The eventual application of a tax reduction[2] for dependency reasons or as support for a war victim.
In the case of a building donation, the debt issue expenses can be deducted from the current market value; in the case that[3]:
- It has been contracted by the donor for the purchase of a building with a credit institution, and, it is charged to the receiver.
What constitutes a donation with a reserved usufruct?
The donor can decide to only transmit a part of the building in order to conserve the usufruct. In this case, the donor can continue to occupy the property and will have the right to keep the revenue generated from its rental. The recipient will have bare ownership of the building.
With this donation, the donation tax can be reduced as it is calculated based on a part of the bare ownership.
The older the usufruct, the more the retained bare ownership gains economic value:
- Up until the age of 21, the bare ownership will be worth 10%[4] of the current market value
- Then, up until the age of 31, the bare ownership will be worth 20% of the current market value
- Then, up until the age of 41, the bare ownership will be worth 30% of the current market value
- Then, up until the age of 51, the bare ownership will be worth 40% of the current market value
- Then, up until the age of 61, the bare ownership will be worth 50% of the current market value
- Then, up until the age of 71, the bare ownership will be worth 60% of the current market value
- Then, up until the age of 81, the bare ownership will be worth 70% of the current market value
- Then, up until the age of 91, the bare ownership will be worth 80% of the current market value
- And for those aged 91 or older, the bare ownership will be worth 90% of the current market value
NB: at the death of the usufruct, no additional tax is due.
If you are interested in exploring any of the above options further, here at Maupard we would be more than happy to advise and guide you down the best route. Furthermore, we can take care of all coordination and communication with the notary so that you don’t have to.
Do not hesitate to contact us via telephone +33 (0) 1 53 93 94 20 or [email protected]. Our team of experts will happily assist you with any queries you might have.
