Items of Securities, Money by U.S. Resident to French Resident Exempt as much as $11.7M

Claire Guionnet

Based mostly on the mixed provisions of the home tax regulation of the U.S. and France, in addition to the tax treaty entered into between the U.S. and France on Nov. 24, 1978, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on estates, inheritances, and presents (Franco-U.S. Tax Treaty), presents of securities or money from a U.S. tax resident to a French tax resident are free from present tax as much as … $11.7 million, whether or not or not household ties exist between the donor and the recipient!

Items qualify as taxable transactions underneath U.S. tax code Part 2502(a). A U.S. tax resident donor is due to this fact doubtlessly chargeable for the cost of the U.S. present tax of 40% of the worth of the present. Nonetheless, U.S. tax code Part 2505 additionally supplies that any individual having her tax residence within the U.S. might switch her wealth, by present or bequest, free from present or inheritance tax throughout the restrict of an quantity decided by regulation. This quantity, which at present stands at $11.7 million for every U.S. tax resident, can be utilized for any switch of wealth made throughout his lifetime (present) or by demise (succession).

With a purpose to profit from this tax exemption, every present given by a U.S. tax resident donor throughout his lifetime, in addition to any present made because of his demise, should be declared, whether or not or not the recipients are members of the family. If the $11.7 million ceiling will not be reached, no present tax is due within the U.S.

This ceiling applies not solely to presents between a donor and a donee who’re each U.S. tax residents, but additionally to presents from a U.S. tax resident to a French tax resident.

Article 8 of the Franco-U.S. Tax Treaty (which is among the seven tax treaties entered into by the U.S. regarding presents) supplies that:

« Besides as offered in Articles 5, 6, and seven, property, together with shares of inventory in an organization, debt obligations (whether or not or not there’s written proof thereof), different intangible property, and foreign money could also be taxed by a Contracting State provided that the decedent or donor was a citizen of or was domiciled in that State on the time of demise or the making of a present, and if taxable by that State underneath its legal guidelines. »

The fitting to tax a present in securities or money granted to a French tax resident donee is due to this fact allotted to the U.S. if the next two circumstances are met:

  • the donor is a U.S. tax resident, and
  • even when no U.S. present tax is successfully paid, because of a particular allowance, exclusion, credit score, or deduction (similar to the edge), the present constitutes a taxable transaction within the U.S.

Article 12(6) of the Franco-U.S. Tax Treaty supplies that:

“If underneath this Conference any property could be taxable solely in a single Contracting State and tax, although chargeable, will not be paid (in any other case than because of a particular exemption, deduction, exclusion, credit score, or allowance) in that State, tax could also be imposed by reference to that property within the different Contracting State however every other provision on the contrary.”

By making use of the provisions of the U.S. tax code (pursuant to which presents represent taxable transactions however assign to U.S. tax resident donors a person exemption as much as $11.7 million) mixed with Articles 8 and 12(6) of the Franco-U.S. Tax Treaty, we conclude that presents of securities or money granted by a U.S. tax resident donor to a French tax resident donee usually are not topic to any present tax within the U.S. if the donor has not reached his $11.7 million threshold, nor in France.

Although favorable, this conclusion is questionable as a result of the individual liable to pay the present tax will not be the identical underneath the tax regulation of the U.S., which taxes the donor, or underneath French tax regulation, which taxes the donee.

Nonetheless, the French tax authorities have, within the context of particular person tax rulings, confirmed that presents of securities or money granted by a U.S. tax resident donor to a French tax resident donee weren’t topic to any present tax in France, as a result of such donations had been taxable within the U.S. and thus, even when no present tax is definitely paid within the U.S. by motive of the deductible imputation.

As a result of these tax rulings are relevant solely to the details introduced within the particular person circumstances on which the rulings had been made, they aren’t binding with regard to every other current or future circumstances, even when the state of affairs at stake is equivalent.

Till the French tax authorities publish an official place of their tips, it’s due to this fact strongly suggested to file a nominative demand for tax ruling with the French tax authorities earlier than continuing with any present from a U.S. tax resident to a French tax resident on the idea that the French donee won’t be taxed.

This column doesn’t essentially replicate the opinion of The Bureau of Nationwide Affairs, Inc. or its homeowners.

Writer Data

Claire Guionnet Moalic is a tax companion at Orsay Avocats Associés in Paris.
Claire makes a speciality of Tax Legislation. She represents French and worldwide shoppers in all taxation points of their monetary operations: capital investments, mergers, acquisitions, reorganizations and trans-border transactions.
Claire additionally counsels shoppers concerning each day operations (monitoring of subsidiaries, administrators’ and staff’ compensation, documentation on switch worth, and so forth.) additionally represents them in all disputes and procedures associated to taxation.
Lastly, Claire represents people concerning private finance and property planning.

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