Tax free gifts or "presents d'usage"

AnOther · November 9, 2008

The following was posted to another thread (hope you don't mind Parsnips) and it got me thinking that if such a system exists then it could potentially be incorporated into ones planning to reduce the tax liability in France.

"If you will need occasional money from your mother a tax
free method (discussed recently with a Notaire ) is for your mother to
send the money in reasonably sized amounts , say up to 2000€ at a time
, on your and your children's birthdays and at Christmas for all of you
. These are called "presents d'usage" and provided they are not
unreasonably large compared to your mothers estate (which, as she is
not in France, the french tax man does not have the authority to
investigate) they are subject to no taxes, and need not be declared."
It raises a couple of questions like is it OK to gift in the other direction, i.e. from children to parents and what exactly are the limits. Gifts of €2000 to parents on their birthdays and for Christmas could equal €6000 which is a sizable chunk of the basic living costs for a couple in France. If ones own income were legitimately 'engineered' to be say €14000 then tax liability would be based on that yet you would have an actual income of €20000 and all above board.

Any thoughts or comments ?

Sunday Driver · November 9, 2008

How would you legitimately 'engineer' your income to be 14,000€??

AnOther · November 9, 2008

€14000 was a nominal figure of course but one obvious way would be to defer buying an annuity and ostensibly live on 2 full state pensions (= to roughly €11,800 I think) plus income from interest on savings.

I see nothing wrong with that do you ?

parsnips · November 9, 2008

[quote user="ErnieY"]The following was posted to another thread (hope you don't mind Parsnips) and it got me thinking that if such a system exists then it could potentially be incorporated into ones planning to reduce the tax liability in France.

"If you will need occasional money from your mother a tax
free method (discussed recently with a Notaire ) is for your mother to
send the money in reasonably sized amounts , say up to 2000€ at a time
, on your and your children's birthdays and at Christmas for all of you
. These are called "presents d'usage" and provided they are not
unreasonably large compared to your mothers estate (which, as she is
not in France, the french tax man does not have the authority to
investigate) they are subject to no taxes, and need not be declared."
It raises a couple of questions like is it OK to gift in the other direction, i.e. from children to parents and what exactly are the limits. Gifts of €2000 to parents on their birthdays and for Christmas could equal €6000 which is a sizable chunk of the basic living costs for a couple in France. If ones own income were legitimately 'engineered' to be say €14000 then tax liability would be based on that yet you would have an actual income of €20000 and all above board.

Any thoughts or comments ?

[/quote]

It is perfectly legitimate to gift from children to parents , and also from france to the UK , and not just to family members, but to anyone. I am particularly interested in this because my present wife is not the mother of my children,and we were looking for a way for her to pass money(if she has got any!) to my children and grandchildren, after she has used up the over 70 yr life assurance limit. With 4 children, 4 spouses, 10 grandchildren and (up to now ) 1 great-grand child, even with modest gifts to each she could move a lot of money each year. The only way that "dons manuels" of cash or cheques '(drawn on english banks) can be picked up is by the french tax people seeing unaccountable amounts in the recipient's bank accounts(not possible for UK resident recipients) for it is ONLY the recipient who is (in france) liable to reveal the gift. At the succession of the donor any reserved heirs are "required "to reveal gifts they may have recieved , but NOT non-heirs--like step-children .

Remember too that declared donations from children to parents, up to the limit of 151950€ are tax-free.

A guide line for individual gifts (presents d'usage) has been laid down by the courts as 1.22% of the donors total assets,but where the donor or the recipient are UK resident ,this is academic as the french tax people have no powers to investigate this.

AnOther · November 9, 2008

Thank you parsnips, very illuminating and well worth looking further into.

Being as both the UK and French tax authorities will always do their utmost to extract every last possible penny or cent from you they legitimately can I think one has a duty to oneself to investigate each and every legitimate method of preventing them - it's called tax avoidance - not to be confused with tax evasion [8-|]

bigears · November 10, 2008

hi

I like the sound of it. 'tax avoidance'. I'm a firm believer in seeking out legitimate means of paying less tax. Go for it.

mint · November 10, 2008

Can you also "gift" to your spouse in the same way?

gosub · November 10, 2008

You can find some info HERE

giantpanda · November 10, 2008

Hi!

Do redo you thinking at the income reduction!

Your "engineering" does not work, because a donation or a présent d'usage, does not have any impact on the sum you have to declare.

Further with an income of Euro 20,000, the Tax office would query what you think to be " present d'usage , as not in proportion to your estate ( unless you did own quite some property).

From Service Public ": Le présent d'usage donné à l'occasion d'événements familiaux

porte quant à lui sur de faibles montants et doit être proportionnel à

l'état de fortune du donateur. Il n'est pas rapportable à la succession

Important would be that the " présent d'usage are regular. There is no sum indicated in the law( that would be too easy ), and it is of the appreciation of the Tax Office .

If you want some sort of indication, in another near field, concerning the life insurance. In a succession you can contest late contribution to a contract ( NB. All contracts ) , if they are over 2.9% of your total estate, per year. This figure is not in the law, but results of divers jurisprudence.

Notwithstanding, the allowances for donations are big enough to make such ( not to 3rd parties ) but of course they have the disavdantage, that if the " héritiers réservataires " knowing this, are disadvantaged, that the amounts will be included in the sums attributed in the succession.

Yours,

giantpanda

PS. You can check the details with your Notaire friend.

mint · November 10, 2008

[quote user="gosub"]You can find some info HERE
[/quote]

Gosub, thanks. Will have a good old read when I have more time to absorb the info.

Haven't noticed you here for a while. How's you's doin?

AnOther · November 10, 2008

All good stuff but you've fair made my brain hurt GP and I'm still not sure I understand you, you must be in the legal profession [:-))] [:D]

[quote user="giantpanda"]Hi!Your "engineering" does not work, because a donation or a présent d'usage, does not have any impact on the sum you have to declare[/quote] Is this your way of saying that présent d'usage sums have to be declared ?[quote user="giantpanda"]PS. You can check the details with your Notaire friend.[/quote]Not my Notaire friend, the reference was in the quote from another thread.

Thebiga · November 10, 2008

As I see some people are thinking along a line of thought that I have I thought I would ask a question.

My mother who lives in the uk will sell her house soon and split the sale price between her siblings. It may mean that I will have £40,000 coming my way and wondered what this would mean for me as a french resident for tax purposes etc.

Any info is welcome. Cheers

parsnips · November 10, 2008

[quote user="giantpanda"]Hi!