Disguised donation: A risky temptation

With a whole department focused on international estate, our French Law Firm based in Paris can assist you in your legal issue. Our extensive experience could benefit you since we learned from different and complicated cases. For this purpose, we can assist you in managing a safe donation to your heirs.

The donation is an act disguised as expensive with counterparty. Most often, it is a contract of sale. However, this costly act conceals in fact a gift, which is characterized by material things _ a loss without compensation and a corresponding enrichment of the other party _ and a mental element, donatives’ intent, the desire to reward someone one.

Disguised donation is used to bypass the tax laws very heavy on the gifts. Indeed, the contractors, by signing a sales contract, avoid the gift tax and the progressive rate. The sale price is not paid, so we arrive at the result of a donation.

If it is discovered that the act for pecuniary liberality cache, it will be reclassified as liberality. The act remains valid even if made between spouses _ if it meets the formal requirements of the Act for consideration, the gift escapes disguised, indeed, the formal requirements of the donations listed in Article 931 of the Civil Code. Thus, a sale of immovable disguising a donation will be reclassified as a gift and transfer of ownership of the property will not be jeopardized if the formal requirements of the sale of property are respected, that is to say the deed. To be valid, the gift must also comply with substantive requirements: legal capacity of the donor and the donee as well as their mutual consent.

The donation applies the full impact and may, like all gifts, be reduced if it affects the subject of other heirs.

When proof of disqualification is reported _ by any means (including: donor age, kinship or friendship with the donee, the donor's financial situation and the donee) or in writing if the challenge is greater than 800 € _ s Administration considers that there is abuse of law because the act is fictitious and was inspired by a purely fiscal grounds. The contractor then exposed to very heavy tax penalties, the taxpayer must pay not only the gift tax but also interest on late payments set at 0.40% per month and an additional increase of 80%.

Thus, if there is no civil penalty _ the donation remains valid concealed _ the tax penalties are dire. We must therefore avoid going through such an arrangement.

We must focus on other transmission mechanisms that can be provided by competent counsel in the matter.

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