Small ticket for New Years or big check? The Christmas period is conducive to donations of money: from what amount does a gift become… a donation which must be declared?
Giving money to your children, grandchildren or even your brothers, sisters, nephews, nieces or even your friends does not necessarily require you to complete a declaration. It all depends on the amount and importance of your assets. Furthermore, even if you must declare a donation of money from relatives, you benefit in certain cases from a tax exemption, with more or less significant amounts depending on the identity of the recipients.
Little Christmas gift: declare nothing!
To avoid any formalism, the donation of money must be considered as a present of use, as confirmed by Xavier Rohmer, associate lawyer at August Debouzy. This customary gift constitutes a manual donation exempt from gift tax which does not require any special declaration to the tax administration.
This notion of present use being completely random, how can you know whether or not your donations must be declared? The lawyer from the August Debouzy firm recognizes that it is impossible to provide precise thresholds, both in amount and in percentage of assets. But it is reassuring, essentially as long as these gifts do not deviate from the norm: When reading the case law, customary gifts are defined as gifts made on the occasion of certain special events for which it is customary to offer a gift to loved ones (an engagement, a marriage, a birth, Christmas, passing an exam, etc.) and which do not exceed a certain value, taking into account the wealth of the donor .
The problem is that the Civil Code is limited to the following definition: The character of a customary present is assessed on the date it is granted and taking into account the wealth of the grantor. In other words, the amount will not be the same from one taxpayer to another. We see an extreme disparity in values depending on the profiles, explains Xavier Rohmer. For example, a gift worth 10,000 euros could be considered a taxable donation in a low-income household, whereas this gift would be considered a customary gift in a wealthier household.
A value that must represent a very limited proportion of the donor’s assets, adds Xavier Rohmer. But how much? A proportion of 1% 2% or even 2.5% of annual income and/or assets is often mentioned, based on case law. But be careful: questioned by a deputy (1) on this percentage of 2.5%, the Bercy services have clearly reminded that there is no maximum threshold, whether in percentage or in absolute value, allowing a distinction between customary gifts and other donations. Brief: case by casedepending on the wealth of the donor (2). It’s up to you to limit yourself to reasonable amounts!
When can a gift be reclassified as a donation?
(Not so) stupid question: should we avoid checks or transfers, in order to avoid leaving traces? The support for the donation, cash, check or transfer, changes nothing. It’s all a matter of proportion, says Christine Valence, wealth engineer at BNP Paribas Banque Prive. If you ever get into the habit of making excessively large donations, you run the risk of seeing these amounts reclassified as donations: Requalification can take place during a tax audit, specifies Xavier Rohmer. When can this control occur? Here again, there is no rule… The history of these donations can also be studied during an inheritance, if the heirs point out excessively large movements of money towards a loved one, family member or No.
There is abundant case law on the subject, adds Lila Vaisson-Bethune, director of wealth engineering at BNP Paribas Wealth Management. One example among others: the gift of a car called into question as a customary gift if this car represents a significant value in relation to the heritage of the giver.
Big gift: declare… but not necessarily taxed
When the donations go beyond a conventional framework (Christmas, birth, civil partnership, birthday, etc.), and when it is rather a question of passing on part of your assets to your loved ones, then these payments must be declared.
Good news, the process is now easier: The tax administration has set up in the specific impts.gouv area the possibility for each taxpayer to declare such donations electronically in a few minutes, notes Xavier Rohmer.
Taxes: how to declare a gift of money without paperwork?
Otherwise, you must complete the form 2735, or declaration of manual donations and sums of moneydocument to be submitted to the tax center within the month following the donation.
Please note, declaring the donation does not necessarily imply the payment of donation tax. In the case of family donations, a exemption of 31,865 euros if the beneficiary is a child, grandchild, great-grandchild or even nephew or nice in the absence of descendants. This exemption is valid for a period of 15 years: a grandparent can therefore give, in several installments over 15 years, up to 31,865 euros to each of their grandchildren. However, the beneficiary must be an adult and the donor must be under 80 years old.
This exemption is combined with personal allowances based on family ties, adds lawyer Xavier Rohmer. And this reduction in gift tax varies depending on the identity of the beneficiary (see below). Thus, depending on the relationship, the tax-free donation can reach – very – high sums.
Gift tax reductions based on parental relationship
The tax reduction applies to the donor (the one who gives), without age limit. It concerns all donations for the same beneficiary over a period of 15 years.
- 80,724 euros deduction for a donation to the spouse or PACS partner;
- 100,000 euros per child;
- 31,865 euros per grandchild;
- 5,310 euros per great-grandchild;
- 15,932 euros for each brother or sister;
- 7967euros for a nephew or a nice.
How to add deductions and family gift exemption?
An example. A 75 year old grandmother can give a grandchild up to 63730 (31865 family gift exemption + 31865 deduction), in 15 years, without having to pay taxes, but she must declare these sums to the tax authorities.
This same grandmother can give 131,865 (31,865 family donation exemption + 100,000 reduction) his son.
On the other hand, if this grandmother wants to give his sistershe does not benefit from the family donation exemption: she can only give 15932 tax-free.
| Who gets the money? | How much? | When? | Declaration necessary? |
|---|---|---|---|
| Present tense | |||
| All (regardless of the parent relationship) | Without precise limit but of a reasonable amount1 | For a one-off event (birthday, Christmas, wedding, birth, etc.) | |
| Exemption for family donations of money | |||
| Childgrandchild, great-grandchild2 | 31865 by beneficiary3 | Ceiling valid on 15 years | |
| Gift tax allowances | |||
lice Or | 80724 | Ceiling valid on 15 years | |
| Child | 100000 for every child | ||
| Grandchild | 31865 for each grandchild | ||
| Great-grandchild | 5310 by beneficiary | ||
| Brother or on | 15932 by beneficiary | ||
| Nephew or nice | 7967 by beneficiary | ||
1 No more than 1% 2% of the assets and/or annual income of the donor, according to case law.
2 Or even nephew or nice in the absence of descendants.
3 Under conditions: donor under 80 years old, and adult beneficiary or emancipated minor.
Taxes: this jackpot that you can give to your children without paying anything
(1) Written question from LREM MP Annag Le Meur. Response from the Minister of Public Accounts on December 31, 2019.
(2) The tax documentation confirms that there is no precise rule concerning the percentage of the value of the donor’s assets for qualification as a gift of use: The tax administration does not set any rule of proportionality of the present in relation to the wealth or income of the donor and assesses the nature of the donation on a case-by-case basis (…) (Rescript of April 3, 2013: criteria for distinguishing between manual donations and customary gifts).