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Tax free gifts or "presents d'usage"


AnOther

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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 ?

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€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 ?

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[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.

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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-|]

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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.

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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.

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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 

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[quote user="giantpanda"]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.[/quote]

   Hi giantpanda,

                I'm afraid I am having difficulty understanding your post.

      1/ A" present d'usage" does not have to be declared--that's part of the point.

      2/ IF the tax office queried the income of the poster to whom I responded (Couple with 5 children) they could easily justify the "present d'usage" status as birthday and Xmas presents to all the family, from a donor IN ENGLAND, over whose wealth the french have no oversight.

       3/Recent court judgements have indicated that a sum of 1.22% of the donor's wealth is acceptable for each gift----but this is academic---see2/ above.

.

        4/ "Presents d'usage CAN be made to non-family members who ,as non-reserved heirs are NOT obliged to reveal them at the succession, and indeed will probably not be present at the succession, especially if the donor is UK resident, in which case there will NOT BE a French succession!

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[quote user="Thebiga"]

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 

[/quote]

Thebiga, I'm not splitting hairs but do you mean your mother is going to share the money between her children rather than her siblings?

It's a crucial point in matters of French inheritance because children and siblings pay different rates of inheritance tax.  But obviously, as your mother is still alive, perhaps I am splitting hairs and therefore it doesn't really matter which of the two you mean.

Sorr......................eeee!

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[quote user="Thebiga"]

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 

[/quote]

     As a child recieving a gift from your mother you have 151950€ of tax free allowance against this gift IF you choose to declare it. If your mother is unlikely to die in France, there is NO legal requirement on you to reveal the gift to the french tax authorities. However, IF they should demand to know where the money came from, you have 30 days to register the gift on form 2735, and there is nothing to pay as you have enough allowances to cover it. If you expect to inherit or recieve more gifts from your mother more than 6 years from now , it could pay you to voluntarily register this gift, as after 6 years the full 151950€ of allowances is again ,PROVIDED you have registered the date of the present gift.

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