Introduction
Mrs M., a resident of Germany, wishes to make a gift of property located in Germany to her daughter who lives in France. The Franco-German tax treaty signed on 12 October 2006 divides the tax liability between the two countries. The specific feature of this agreement is that it takes into account the residence of the beneficiaries (donees or heirs).
Property taxation
Under Article 5 of the treaty, the transfer of immovable property is subject to taxation in the State where the property is located. Germany will therefore tax the gift of the property located on its territory.
Impact of the donee's residence
However, as his daughter is resident in France, France is entitled to tax the full value received, even if the property is in Germany (article 11-1c). This specific clause is rarely included in treaties, which in principle only take into account the country of residence of the donor or the deceased.
Avoiding double taxation
To avoid double taxation, the beneficiary can deduct the tax paid in Germany from the tax due in France on the property located in Germany.
Conclusion
In conclusion, a thorough understanding of the provisions of the Franco-German tax treaty is essential to ensure the correct application of tax laws and avoid any risk of double taxation. Careful reading of all treaties will ensure that tax management complies with the established rules.
