How to Give Money as a Holiday Gift Without Tax Consequences

For one in three French people, the ideal Christmas gift is money. But be careful—when it comes to giving money, not everything is allowed. The tax authorities are keeping a close eye on things.

From the tax authorities’ perspective, a small Christmas envelope can be classified as either a customary gift or a manual gift. The difference between the two is very significant, since a customary gift is not included in the estate and is not subject to taxation. Conversely, a manual gift is included in the calculation of the estate and is therefore taxable.

For a monetary gift to be tax-free for both the donor (the person giving) and the recipient (the person receiving), two rules must be followed. 
First, the gift must be made on the occasion of certain special events. In addition to receiving a diploma or a driver’s license, it may be given as a year-end gift, for a birthday, a wedding, etc. 
 

This is a rule that should not be taken lightly. The history of all these gifts may be examined during a tax audit or in the event of an estate settlement if the heirs report unusually large transfers of money to a close associate, whether a family member or not. 
 

In a decision dated May 11, 2023, the Court of Cassation reiterated that the giving of a sum of money unrelated to any specific occasion cannot be classified as a customary gift.

A second important rule is that the value of the money or property given must be “reasonable.” This is a concept that is assessed on a case-by-case basis. “It’s all a matter of proportion,” say officials at the Ministry of Finance in Bercy. The gift of a new car, for example, is evaluated in relation to the giver’s net worth. Similarly, a Christmas gift of 10,000 euros from parents of modest means will raise the tax authorities’ suspicions. And it doesn’t matter whether the amount is paid in cash, by check, or by bank transfer. The history of all such gifts may be examined during a tax audit or during probate proceedings if the heirs report unusually large transfers of money to a relative—whether a family member or not.
 

In a ruling dated April 11, 2002, the Paris Court of Appeals thus held that a mother’s presentation of a check for 15,000 euros (100,000 francs at the time of the events) to each of her two sons during the Christmas holidays constituted a customary gift, given the recipient’s wealth. In this case law, the judge introduces an interesting factor: he relates the gift to the donor’s net worth, which in this case was 2.4 percent.
 

However, there is no rule of proportionality, either in statutory law or in case law. Most of the time, the judge relies on vague concepts such as “not exceeding a certain value.”
 

Keep in mind that in the event of a dispute, the judge will decide. Another important point to note is the reference period. 

In a case heard by the Court of Cassation in 1995, a father had given his daughter eight watercolors worth 11,000 euros (70,000 francs) as a wedding gift. Ten years later, the daughter sold seven of them for 860,000 euros. The Court of Cassation ruled that the gift constituted a customary gift, given the father’s wealth at the time of the wedding.