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Thursday, 20 November 2008 |
Thinking about giving a big overseas gift? Better check tax procedures first. Dordogne notaire Lionel Galliez gives you the heads up before you send.
Fed up with taxes?
While the road to tax
heaven can be filled
with roadblocks, there are
always detours worth
exploring. Let’s take a nontextbook
example: imagine
you’ve decided to give
your son an apartment in
London. You no longer
need it since you’ve
bought a nice old
farmhouse in the
Dordogne where you now
spend most of the year.
One day, you make an
appointment with your
solicitor in England to
draft the deeds. Eventually,
it gets signed and your son
is happy. Of course he is –
the apartment is worth at
least £300,000, even in
this time of crisis. All’s well
that ends well? But wait,
you’ve forgotten a key
player: the French taxman!
How does this situation
concern him? You’ll find
the answer in the article
750 of the Code général
des impôts – general tax
code. It says that if the gift
giver is living in France,
the one who receives the
gift must pay taxes even if
it is a property abroad. If
you read the article
carefully, which is a
masterpiece of legal lingo,
you’ll be surprised to find
out that the rule applies
both ways: if the giver lives
in the UK and the receiver
lives in France, the gift is
taxable as well. There is
just one exception: a
donée (receiver) who has
lived in France less than six
years during the last ten
years is exempt.
In the case presented
here, the payable tax on
the apartment would be at
least €22,000, but it could
be much more if you had
given the property not to
your son but to a grandson
or nephew. Still, who must
pay the bill? Normally, the
receiver has to pay the tax
but if he’s not living in
France, the French tax
department could neither
find him nor ask him to
pay. Don’t think the matter
is closed, however, for the
tax department has a
secret trick: joint liability.
As described above, the
taxman will turn towards
the person who has given
the property. And it will be
that much easier to get
him to pay when he’s living
in France.
You may think that,
odds are, such information
will never cross the
Channel. It may be true
currently, but the Direction
des impôts and the Inland
Revenue are collaborating
better and better.
Computerisation and
cross-checking work
wonders, and don’t be
surprised if one day the
fog lifts between French
and British taxmen.
While some people
love taking risks, most
prefer to sleep well at
night. For the latter,
prevention is key: if you
plan to give a gift, you’d
better take advice from a
notaire first. He will tell
you the costs and may find
a way for you to give
legally without owing any
tax in France, or at least
how to drastically reduce
the bill. But more
importantly, he’ll show
you that when you know
the rules, you no longer
feel trapped.
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