Franco-Belgian estate planning – Towards the abolition of the ‘grace period’ for new French tax residents?

As part of the draft Finance Bill for 2026, an amendment adopted on 8 January seeks to tighten the territorial scope rules set out in Article 750 ter of the French General Tax Code (“Code général des impôts” – CGI)1.

By way of reminder, this provision determines the situations in which a gift or an inheritance is subject to French gift or inheritance tax. Gifts and bequests are liable to French gift tax (droits de mutation à titre gratuit) where at least one of the following alternative criteria is met:

1. The donor or the deceased is domiciled for tax purposes in France.

2. The assets transferred qualify as “French situs assets”.

3. The beneficiary qualifies as a “French tax resident” and has been resident in France for at least 6 years, whether continuously or intermittently, during the 10 years preceding the transfer.

The authors of the amendment intend to tighten this third criterion by abolishing the minimum residence period of 6 years, below which the French tax authorities are currently not entitled to tax gifts or inheritances in the hands of a French tax resident beneficiary.

The stated objective is to combat certain estate planning strategies deemed overly aggressive. In particular, the amendment targets situations in which a wealthy French taxpayer relocates abroad before making a gift to descendants (e.g. grandchildren) who are resident in France but have not yet completed 6 years of residence there, thereby avoiding French gift tax altogether.

Under the current rules, such a gift may indeed escape French transfer taxes, provided it cannot be characterised as abusive.

Scope of the reform

The abolition of this minimum residence requirement is likely to affect a wide range of other situations that are often entirely legitimate, and to call into question the balance initially sought by the French legislator, which aimed to enhance France’s attractiveness for foreign executives (impatriates) and to encourage the return of French nationals previously established abroad.

Going forward, the fact that a beneficiary has lived in France for less than 6 years during the preceding 10 years would no longer allow, in any circumstances, for an exemption from French gift or inheritance tax (subject to the possible application of a tax treaty).

As a result, individuals who received, shortly after moving to France, so-called “dons manuels” (manual gifts) from parents resident outside France (e.g. in Belgium, Switzerland or elsewhere), which have not yet been declared or “disclosed” to the French tax authorities, could now become subject to French taxation on such gifts.

Entry into force

It remains to be seen whether this amendment will be retained in the final version of the Finance Bill when it is passed, and, if so, which date will be chosen for its entry into force.

To be continued…

 1. https://www.assemblee-nationale.fr/dyn/17/amendements/2247/CION_FIN/CF130