Taxation of French gifts to charity – new decision of EU Court changes position
This article is for general information only. International succession law, taxation, foreign property and charity law are highly specialised areas and you should only act or refrain from acting after receiving full professional advice on the facts of your particular case.
There have always been tax problems in (1) French residents making gifts to non-French charities and (2) Non-French residents gifting French land to charity. Substantial gifts are usually made by will to charities and in these cases tax at 60% has generally been levied in France. Situation (2) above has caught UK residents and other non French estates, with testators making legacies of their French holiday homes to charity unaware of this punitive French taxation. In some cases it is possible to interpret the gift as being made to the French branch of an international charity and so avoid the 60% tax. However in the case of charities with no operations in France this is impossible.
Article 795-0 A French Tax Code
France was some years ago contacted by the EU and informed its position was in breach of EU rules on the free movement of capital. In an attempt to avoid being found in breach of its EU obligations on 30th December 2014 France introduced Article 795-0 A into its Tax Code. This provided that charitable gifts to charities in other EU countries are exempt from French tax if the foreign charity has been approved by the French Tax Authority. If the charity has not been approved it is still possible to obtain the tax exemption if documentation is provided to prove that the non-French charity has the main objects and characteristics of a French qualifying charity. It is difficult to know how this will work in future. Under Article 795-0 A the fact that the charity is registered as a charity in another EU country is not of itself sufficient to exempt a gift to it from French tax.
France has various treaties with individual EU countries which grant tax exemptions for charitable bequests to these organisations. These are very restrictive and cover a small number of EU countries.
EU Court decision of 16th July 2015 (C-485/14)
The EU Court has decided that France is in breach of its obligations under EU rules. French law will have to be amended to provide that charities registered in other EU countries will benefit from the same French tax exemptions that French charities benefit from. It will no longer be a requirement that such charities are approved by the French Tax Authority or that their status is proved under French law.
UK charities should inform their supporters that legacies of French assets can be gifted free of tax.