The same euro given does not carry the same tax

Mr Ricard wants to give 30 000 € to his grandson, and the same amount to his neighbour's son, whom he watched grow up. The first will pay nothing. The second will owe 17 044 € of tax, more than half the gift. Before you read on: where does a 17 044 € gap on an identical gesture come from?

One allowance per donor-donee pair

The gift allowance attaches neither to the donor alone nor to the recipient alone: it attaches to the pair they form. A child receiving from their father and from their mother has two allowances of 100 000 €, because there are two distinct donors.

This is the first lever of any organised transfer, and it is purely arithmetic. A couple with three children has six allowances of 100 000 €, that is 600 000 € transferable free of tax, before even mentioning the family gift of money.

The amounts follow the relationship. Article 779 of the tax code sets 100 000 € for a child or an ascendant. Neighbouring texts step down the ladder: 31 865 € for a grandchild, 5 310 € for a great-grandchild, 80 724 € between spouses or civil partners.

Outside the direct line, the drop is brutal: 15 932 € between brothers and sisters, 7 967 € for a nephew or niece. And for a person with no family tie, the ordinary allowance is 1 594 € — a token amount against the rate that follows.

A further allowance of 159 325 € benefits a recipient unable to work under normal conditions of profitability. It stacks with the relationship allowance, including where that relationship is remote: it is the only case in which an unrelated person can receive a substantial sum free of tax.

The 55 % and 60 % rates deserve to be looked at squarely. They do not strike a marginal slice but almost the whole sum, the allowance preceding them being negligible. Transferring outside the family therefore costs, in practice, more than half of what is transferred.

One consequence follows for anyone planning ahead: the choice of recipient weighs more heavily than the choice of amount. Moving the same gift one step along the family tree changes the tax far more than adding or removing a few thousand euros from it.

Two different scales in the direct line and between spouses

Past the allowance, a gift follows the same scale as an inheritance — the same article 777 governs both. But between spouses and civil partners the lower bands are not those of the direct line, something most simplified tables leave out.

In the direct line the 15 % band stops at 15 932 €. Between spouses it stops at 31 865 €, and the 20 % band only starts there. The gap is modest in absolute terms, but it corrupts any calculation copied from one scale to the other.

One point matters in inheritance and not in gifts: the surviving spouse is exempt from inheritance tax, but is not exempt from gift tax. Giving to one's spouse during life has a cost; leaving it to them on death has none.