Your legal questions answered: French property and tax
Consultant Solicitor John Kitching and Sarah-Bright Thomas of Bright Avocats answer reader questions in the June edition of Connexion.
Will gifting property now save tax later?
A friend lives in one of my properties “titre gracieux”. I wish to transfer ownership before I die, as it would otherwise be subject to inheritance tax. Is it possible to transfer the property without money changing hands (or for a nominal amount) and avoid costs, other than the notaire’s fee? D.G.
Unfortunately, a gift of property made in your lifetime is subject to the same tax rates as apply for inheritance. If a gift is made, then gift tax is paid on making it. As the gift is a transfer of property, then it must be recorded by a notaire. The notaire then assesses the gift tax due. If you survive the date of making the gift by 15 full years, the gift is not then taxed in your estate. This can be helpful where, for example, there is a large tax-free allowance, such as the €100,000 parent to child allowance.
If you die within 15 years of making the gift, the value of the property is added back in to your estate, but credit is given for the gift tax already paid. As your friend is not a relative, he or she will face 60% inheritance tax (or gift tax) on any value exceeding a rather pathetic €1,594 allowance. Likewise, if a sale was made at an undervalued price, the difference between the nominal value and market value would be taxed as a gift.
The most cost-effective way to allow your friend to purchase or inherit may be to gift them, or bequeath them, a life interest, which would allow them to live in the property for their lifetime. The purchase value or gift/inheritance value would then be a percentage of the property value, based on the age of your friend – the older they are, the lower the value, eg. if they are aged 61 to 70, the value is 40%; if they are 71 to 80, the value is 30%; for 81 to 90, the value is 20%; and 91 or over, it is 10%.
Tel: +44 (0)113 393 1930 / www.heslop-platt.co.uk / firstname.lastname@example.org
No more delay in checking building permits
We have an application in for a building permit permis de construire to build a new house but we do not know what is happening, since the checking work was stopped due to the coronavirus. The deadline for the mairie to come back to us was approaching as the examen de permis was being done and, as we must put up a notice of the planned work if approved, we fear any further delay will stop us being able to start work this summer. How do we stand? A-S. M.
Mairies must work to legal deadlines in examining and checking your application, most notably the two months allowed to check it and decide (three months or longer in the case of an historic site) before it is deemed to be approved by default if the mairie has not replied in time. When the government froze all such work during the health emergency, many in the construction industry feared this would lead to paralysis and called for this to be restarted quickly.
Now the government has said the extension of the health emergency restrictions until July will no longer apply for the checking of building permits and this work should restart from May 24. Your mairie will take up where it left off and the clock will start ticking again. As you say, you must post a notice of the permit to give neighbours two months to object before work starts.
Tel: 05 61 57 90 86 / www.brightavocats.com / email@example.com
If you have a legal query send it to firstname.lastname@example.org. We select questions for answer every edition.