How are a property gift and a property inheritance taxed?

The principle: an allowance then a progressive scale

The gratuitous transfer of a property, by gift during one's lifetime or by inheritance on death, gives rise to gratuitous transfer duties (droits de mutation à titre gratuit, DMTG). The calculation follows a two-step logic: an allowance is first applied to the share going to each beneficiary, then the remaining taxable share is subject to a progressive scale by bands.

The amount of the allowance depends on the degree of kinship between the donor or deceased and the beneficiary (Article 779 of the CGI). The closer the relationship, the higher the allowance. The scale of rates, also a function of the degree of kinship, is set out in Article 777 of the CGI. These allowances and rates are set by law and can be amended: check the amounts applicable at the date of the transfer.

• Gift and inheritance: gratuitous transfer duties (DMTG).
• Step 1: allowance according to the degree of kinship (Article 779 of the CGI).
• Step 2: progressive scale by bands according to the degree of kinship (Article 777 of the CGI).

Allowances according to the degree of kinship

Article 779 of the CGI provides in particular for a direct-line allowance, applicable to the share of each ascendant and each child, whose reference amount is currently 100,000 euros. Distinct allowances exist for other relationships (siblings, nephews and nieces), and a specific allowance is provided for grandchildren in respect of gifts; a specific allowance in favour of people with disabilities is moreover combinable with the others.

Certain situations benefit from particular treatment. Thus, the surviving spouse and the surviving PACS partner are fully exempt from inheritance duties (Article 796-0 bis of the CGI). For gifts, however, the spouse or PACS partner has an allowance, not a full exemption. These amounts are liable to change: consult the scale for the year.

• Direct-line allowance (parent/child): reference amount of 100,000 euros (Article 779 of the CGI).
• Distinct allowances for siblings, nephews and nieces; a specific allowance for grandchildren for gifts.
• Additional allowance for people with disabilities, combinable.
• Spouse and PACS partner: exempt on inheritance (Article 796-0 bis of the CGI), allowance only on gifts.

The 15-year tax recall and the valuation of the property

The allowances are not acquired once and for all: they are reconstituted in periods of 15 years. On a new transfer, prior gifts made by the same person to the same beneficiary less than 15 years earlier are brought back in, which reduces accordingly the allowance and the low bands of the scale still available. A gift dating back more than 15 years is, by contrast, ignored: this is the tax-recall mechanism (Article 784 of the CGI).

This 15-year period is a legal parameter that has already varied in the past; check its length for the year of the transaction. In practice, it encourages people to anticipate and stagger gifts in order to use the allowances several times.

The property transferred is valued at its actual market value on the day of the transfer, that is, its market price. An undervaluation can be corrected by the tax authority. For a gift, reductions in duties may also apply in certain cases, and the splitting of ownership rights, notably the gift of bare ownership with reservation of usufruct, reduces the taxable base according to the usufructuary's age (Article 669 of the CGI). Get support from a notaire, who alone has authority for these transfers.

• Reconstitution of allowances every 15 years (tax recall, Article 784 of the CGI).
• Gifts more than 15 years old not brought back in: anticipating allows the allowance to be used several times.
• Property valued at its actual market value on the day of the transfer.
• Splitting of ownership (gift of bare ownership): reduced base according to the usufructuary's age (scale of Article 669 of the CGI).