Gift or Donation?
If you want to do something nice for your loved ones, you can give or donate whatever you like to whomever you choose. But there’s a fine line between the gifting and donating, and the reporting requirements and taxes are very different.
Which is which?
When you pass on an asset or a sum of money to someone dear to you, it’s tempting to claim it as a gift rather than donation, to avoid the reporting requirements. Unlike a donation, a gift does not need to be reported or is tax-free.
Gift (or “present”) and donations include items or assets that you can literally “hand over”, such as a sum of money, a piece of furniture, a painting, a piece of jewellery or a car. In both cases, you must want to make the gift or donation, and be acting on your own free will.
But for generosity to qualify as a gift, two conditions must be met:
An event: the gift must be connected to an event for which it is customary to give something, a recurring (birthday, Christmas) or one-time event (such as getting married, buying property, having a baby).
The financial situation on the date the gift is given: the gift must be of modest value with respect to your financial situation and your income. Whether something qualifies as a gift is assessed on a case-by-case basis. There’s no scale for evaluating how “modest” a gift is.
In theory, gifts do not involve any formalities. In practice, when giving a gift, it’s important to retain proof of the gift status when it takes place. So hold on to January’s bank statement if you’ve wired money as a “New Year’s gift”, which should be specified as such.
For donations, you don’t have to have anything in writing. However, the recipient must report it to the tax authorities, even if no duties have to be paid. They can do this free of charge.
Now that the system for registering donations has been moved online, the recipient can file the report and pay any dues owed right from their personal account at www.impots.gouv.fr.
What about taxes?
Remember, a gift is not taxable. A donation, on the other hand, is taxable based on your family ties to the donee. Abatements or exemptions(1) may apply that reduce the taxable amount and are renewed every 15 years, including:
a €100,000 abatement on donations to each child,
€31,865 for donations of money made by a donor under 80 years old to an adult beneficiary – a child or grandchild of the donor, or a nephew or niece if there are no direct descendants, as long as the report is filed within a month of the date of the donation,
€159,325 in further abatement for donations to a person with a disability.
Together with your advisor, our experts are on hand to assist help you and your loved ones as you consider your options.
(1) These abatements or exemptions apply to donations made by each donor and for each donee.
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