The Don Manuel and Disguised Gifts in France

What a manual gift (don manuel) is

A manual gift (don manuel) is a gift made by the simple hand-to-hand delivery of the thing given, without any notarial deed. It is the everyday way families in France pass money and moveable things between the generations: a parent hands over cash, writes a cheque or transfers a sum from one bank account to another, and the gift is complete. French law normally insists that a gift be made by authentic act before a notaire, on pain of nullity (Article 931 of the Civil Code), but the manual gift is the great exception — it is valid without any form at all, provided the thing is actually delivered.

What the manual gift escapes is the requirement of form, not the substance of a gift. To be valid it must still satisfy the ordinary conditions of a lifetime gift (Article 1128 of the Civil Code) — a person capable of giving, a person capable of receiving, and the intention to give (the intention libérale). Beyond that, no formality is required: it is enough that there is an actual and irrevocable dispossession of the person making the gift. Because a gift is irrevocable, the delivery (the tradition) must take place during the donor's lifetime; a "manual gift" that is only meant to take effect on death is not a manual gift at all and fails for want of delivery.

Most manual gifts are gifts of a sum of money, and the money can pass in any of the usual ways. The courts accept a manual gift made in cash, by cheque, or by a transfer from one account to another (virement de compte à compte): the transfer of a sum standing to the donor's account into the recipient's account is a valid mode of delivery and a manual gift made through the intermediary of a third party (the bank) (Cour de cassation, civ. 12 July 1966). The technique is not limited to money. Moveable property such as jewellery, furniture, a vehicle, or business stock and equipment can be given by hand; and because securities are now dematerialised and pass by an account-to-account transfer, registered and bearer shares can themselves be the object of a manual gift (Cour de cassation, com. 19 May 1998, no. 96-16252).

Where delivery is genuine, and where it is not

The whole validity of a manual gift rests on the reality of the delivery, and that is where disputes begin. A transfer into a joint account, for instance, is not a good delivery, because the person who made the transfer remains free to withdraw the money from the joint account at any time and so has not truly divested themselves (Cour de cassation, civ. 17 April 1985, no. 83-16939). The same difficulty arises where the person handling the money holds only a power of attorney over the account: a transfer made by someone who has a power over the account proves nothing on its own, and the reality of a gift then turns on separate proof of the intention to give. Because it is customary not to draw up any writing, a manual gift is hard to prove, and both donor and recipient can have an interest in establishing it. The prudent course, where the manual gift is kept rather than replaced by a notarial deed, is to record it in a side-agreement (pacte adjoint) — a private writing, signed after the gift, that confirms the gift and fixes its terms.

Customary gifts (présents d'usage) are outside all of this

A category of everyday giving falls outside the rules on manual gifts altogether. A customary gift (présent d'usage) — a present made on a customary occasion, such as a birthday, a wedding or an examination passed, and not exceeding a certain value — is not treated as a gift at all in law (Article 852 of the Civil Code). The courts define it as a present given on the occasion of certain events, in accordance with usage, and not exceeding a certain value (Cour de cassation, civ. 6 December 1988, no. 87-15083). Because it is not a gift, a customary gift is neither brought back into the estate on the donor's death nor subject to gift or inheritance duty. Whether a particular present qualifies is a question of fact judged on the concrete circumstances, and the tax authority sets no fixed proportion of the donor's wealth or income: a gift is neither modest nor large in the abstract, only in relation to the means of the person who made it. Cross the line — a "birthday present" that is really a substantial transfer of capital — and what you have is a manual gift, with all the duties and formalities that follow.

Declaring a manual gift

A manual gift is declared by the recipient, on a dedicated form, within one month of the gift being revealed to the tax authority. The form is form 2735, the declaration of manual gifts and gifts of money, and it is filed by the recipient (the donataire), together with payment of any duty due, within one month of the date on which the recipient revealed the gift to the authority (Articles 635 A and 757 of the General Tax Code). A manual gift declared on form 2735 attracts the same allowances, scale of rates and reductions as any other gift. Since 30 June 2021 the declaration must be filed, and any tax paid, electronically (Article 1649 quater B quater of the General Tax Code). The form itself states the details needed to identify the gift and the parties, to recall earlier gifts, and to assess the duty (Article 281 E of Annex III to the General Tax Code).

It is important to see who has to declare, and when the month runs. The person on whom the obligation falls is the recipient, not the donor — indeed a declaration by the donor alone changes nothing on the tax side, as the next section explains. And the month does not run from the day the gift was made; it runs from the day the gift is revealed to the authority. A manual gift can sit undeclared for years and then be revealed, and it is that later revelation, not the original delivery, that starts the one-month clock.

Gifts above €15,000: the option to defer

Special rules of declaration apply to manual gifts of more than €15,000 (Articles 635 A and 757 of the General Tax Code). Where the recipient's revelation is spontaneous and the gift exceeds €15,000, the recipient may choose, when they declare, between two moments for declaring and paying the duty (Article 635 A, a of the General Tax Code): either within the month of the revelation, or within the month of the donor's death. The second option lets the recipient defer the gift duty until the donor dies. The €15,000 threshold is assessed at the date the option is exercised and separately for each gift. The option is exercised electronically on impots.gouv.fr using form 2734; the recipient states the amount or value of the gift, but no duty is collected at that stage.

The deferral option is reserved for a spontaneous revelation. Where the manual gift comes to light not because the recipient volunteered it but because they answered a request from the tax authority or were caught by a tax audit, the special declaration must still be made within a month of the revelation, but the deferral to death is not available and the duty must be paid within that month (Article 635 A, second paragraph, b of the General Tax Code; Cour de cassation, com. 25 January 2023, no. 20-16700). A letter written to the authority in the course of a personal tax examination, mentioning the existence of a manual gift, itself counts as a revelation for these purposes (Cour de cassation, com. 4 March 2020, no. 18-11120). Where the recipient does opt to declare and pay after the donor's death, the authority's power to reassess runs to the end of the sixth year following the death (Article L. 181 A of the Book of Tax Procedures).

Why declare a gift spontaneously

Declaring a manual gift voluntarily, even when no duty is immediately due, buys the family several concrete advantages, and the most valuable of them is a certain date. Registration of a manual gift freezes the value of the thing given, gives the gift a certain date for the purpose of the fifteen-year recall rule, opens the door to the family cash-gift exemption, forestalls disputes between heirs, and establishes a clean origin for the funds. Each of these is worth setting out, because together they explain why practitioners almost always advise revealing a gift rather than keeping it quiet.

The fifteen-year point is the heart of it. If the donor dies more than fifteen years after the gift was revealed, the gift is left out of account in calculating the inheritance duty, and the recipient has the full benefit of the personal allowance then in force; equally, fifteen years after the gift a fresh gift can be made between the same people with the full renewed allowances (Article 784 of the General Tax Code). But the clock only runs against the authority from the date the gift is given a certain date by being voluntarily presented for registration. A manual gift merely surfacing in the course of a tax audit does not benefit from the fifteen-year rule until the day it is voluntarily registered (ministerial reply Sauvadet, no. 6251, 21 February 1994). In other words, the fifteen years you are counting on only start when you declare.

Two further reasons matter in practice. First, declaring the gift lets the recipient claim the reliefs French law reserves for gifts, including the family cash-gift exemption of €31,865 for money given to a child, grandchild or great-grandchild by a donor under 80 to an adult recipient, renewable every fifteen years (Article 790 G of the General Tax Code), on top of the ordinary direct-line allowance of €100,000 per child (Article 779, I). Second, declaring the gift prevents family conflict and proves the source of the funds: where relations between heirs later sour, a recipient who has declared has nothing to fear from a co-heir revealing the gift, and the money or asset has a certain origin that can be shown to the authority on any later enquiry. A gift kept in the dark to save a declaration can prove far more expensive when it eventually comes to light.

When the manual gift becomes taxable

A manual gift is not taxed when it is made; it is taxed when it is revealed, and — failing any earlier revelation — on the donor's death. The event that triggers the duty (the fait générateur) is, in principle, the date the manual gift is revealed to the authority, and the date on which the gift was actually made is irrelevant to the tax (Cour de cassation, com. 10 October 2000, no. 97-21591). The legislature's choice to fix the taxable event at the moment of revelation rather than the moment of the gift rests on an objective and rational criterion and is constitutionally sound (Constitutional Council, decision 2021-923 QPC of 9 July 2021).

Revelation can happen in several ways, and gift duty is due when the recipient reveals the gift to the tax authority (Article 757, second paragraph, of the General Tax Code). It is due, too, where a manual gift is recorded in a deed subject to registration that states the recipient's declaration of the gift, or where a court recognises the gift — even in the reasoning of a judgment, and even a judgment of an administrative court, provided it unambiguously establishes the transfer as a gift (Cour de cassation, com. 26 September 2018, no. 16-28410). Foreign judgments and foreign deeds that recognise a manual gift of French assets give rise to French duty, as do those over foreign assets where the donor is resident in France (Article 750 ter of the General Tax Code).

One rule catches donors out repeatedly: only the recipient's revelation triggers the duty. A declaration by the donor alone, even a voluntary presentation for registration, does not make the gift duty payable; the duty becomes due only if the gift is declared or revealed by the recipient. The fact that the donor had already brought the gift to the authority's knowledge before the recipient's own admission does not relieve the recipient — the only person the article targets — of the obligation (Cour de cassation, com. 4 December 2007, no. 06-19251).

Death of the donor: duty even where nothing was declared

The donor's death is the long-stop taxable event. Where a manual gift was never declared and never bore duty during the donor's lifetime, it becomes taxable on the death if the recipient is among those who inherit, through the recall of earlier gifts: the law requires every deed recording a lifetime gift, and every inheritance declaration, to state the earlier gifts made by the donor to the same person, and duty then applies to the manual gifts that had escaped tax (Article 784 of the General Tax Code). This is the most common way a manual gift ends up taxed. Crucially, when a manual gift is taxed on the death through the recall, it is inheritance duty that applies, not gift duty, and the exemptions and allowances specific to gifts are then unavailable (Cour de cassation, com. 31 March 2004, no. 02-10578). A gift left undeclared can therefore be taxed on worse terms than if it had been declared in good time.

The value on which the duty is charged also turns on how the gift comes to be taxed. For a declared manual gift, the duty is assessed on the higher of two figures: the value at the day of declaration or registration, and the value at the day of the gift (Article 757 of the General Tax Code). But where the gift is instead recalled on a later gift or on the death, it is valued at the day of that new event — except that a gift of money is recalled only at its nominal amount, without revaluation and regardless of what the recipient did with it (Cour de cassation, com. 20 October 1998, no. 96-20960). Omitting a manual gift from an inheritance declaration, which the person filing swears to be true and sincere, exposes the taxpayer to late-payment penalties and fines if the authority proves the gift existed.

Indirect and disguised gifts

A gift does not have to look like a gift. Two further forms of giving sit alongside the manual gift and, like it, are valid without the notarial formality that ordinary gifts require — but both generate a great deal of litigation because their true nature is hidden. An indirect gift (donation indirecte) rests on a real act that happens to enrich someone; a disguised gift (donation déguisée) rests on a simulated act, usually a sham sale, that conceals a gift behind the appearance of an ordinary paid transaction.

An indirect gift is a genuine act, undertaken for its own sake, whose effect is to benefit another person without consideration. Because it rests on a real act, it must respect the form required for that act: an indirect gift carried out through the sale of a building needs the authentic deed a sale of land requires, whereas a father who has granted his son a gift subject to a rent and then renounces the rent can do so by a private writing (Cour de cassation, civ. 5 April 2005, no. 03-19614). Indirect gifts commonly take the form of a renunciation of a right, the assumption of another's debt, or the financing of an acquisition. The courts have found an indirect gift where a spouse's share of a couple's purchase was in truth paid from the other spouse's funds (Cour de cassation, civ. 14 December 2004, no. 02-11088), and where property bought jointly by spouses married under a separation-of-property regime was financed by the husband alone without any mention of it in the deed of sale — a transaction that was an indirect gift to the wife of half the funds advanced (Cour de cassation, com. 15 March 2011, no. 10-14886).

A disguised gift is different in kind: it presents itself under the appearance of an act for value — a sale, above all — but conceals a gift, which is characterised by a material element (an impoverishment without consideration) and a moral element (the intention to give). A disguised gift is made out where the conditions of form of the sale whose appearance it borrows and the conditions of substance of a gift are both present. The disguise must be perfect: a sale at a derisory price is not a disguised gift, because the imbalance between what is given and what is received appears from the outset, so nothing is truly concealed. On the civil side it is usually the heirs who feel short-changed who challenge the act, and to prove the gift they must establish the intention to give, which is never presumed (Cour de cassation, civ. 19 March 2014, no. 13-14795; civ. 7 October 2015, no. 14-20696). Where the challenge is that a sale was really a gift, it falls to those attacking it to prove, by any means, the absence of any real payment (Cour de cassation, civ. 3 April 2019, no. 18-18679).

The consequences on the civil side are the same for both. An indirect gift and a disguised gift are, like a manual gift, brought back into the estate (rapport) where the beneficiary is an heir called to the succession, and can be reduced (réduction) where they encroach on the reserved share of the other heirs. Importantly, a disguised gift, once proved, is not annulled: the transfer of ownership stays valid, and the beneficiary is simply exposed to bringing the value back or indemnifying the reserved heirs who would otherwise be deprived of their minimum share. What changes on the tax side is graver, and it is the subject of the penalties section below: a disguised gift falls under the abuse-of-law procedure.

Sale with a reserved usufruct to a child (the Article 918 rule)

There is one arrangement the law refuses to take at face value: a sale of property to a child, in the direct line, where the parent keeps a life interest. A sale of the bare ownership of an asset with a reserved usufruct to a presumptive heir in the direct line is automatically treated as a disguised gift, and the seller cannot prove the contrary (Article 918 of the Civil Code). The rule exists because such a sale is the classic way to dress up a gift: the child "buys" the bare ownership, the parent keeps the use and income for life, and on the parent's death the child owns the whole — often with no real price ever having changed hands.

Article 918 does not annul the transaction; it re-characterises its value for the protection of the other children. The full-ownership value of assets alienated to a direct-line successible — whether the alienation is against a life annuity, at a lost fund (à fonds perdus), or with a reserved usufruct — is charged against the freely disposable portion (quotité disponible), and any excess is subject to reduction (Article 918 of the Civil Code). In other words, the whole value of the property is treated as a gift out of the disposable portion, so if it exceeds the part of the estate the parent was free to give, the surplus can be clawed back for the reserved heirs. This charging and reduction can only be claimed by the other direct-line successibles who did not consent to the alienation.

That last point is the escape route, and there are two of them. The presumption of a disguised gift does not apply where what the parent reserved is a mere right of use and habitation rather than a usufruct, or where the other children declare in the deed that they accept the sale (Article 918 of the Civil Code). A sale to one child with the informed, recorded consent of the others is not caught; nor is a sale that reserves only a right to live in the property rather than the broader usufruct of use and income. Absent one of those, the arrangement is treated as a disguised gift automatically and irrebuttably, and the seller is not allowed to lead evidence that a genuine price was paid.

The civil re-characterisation under Article 918 travels with a tax risk, because the same facts that make a sale a disguised gift in civil law expose it to the abuse-of-law procedure in tax law. A sale to a child with a reserved usufruct that is really a gift is precisely the kind of arrangement the tax authority requalifies, with the consequences set out next.

Penalties for getting it wrong

On the tax side, a disguised gift is dealt with under the abuse-of-law procedure, and the penalties are severe. The sanction is that the sham act is treated as unenforceable against the tax authority, which produces a reassessment of the duty that was avoided — the gift duty — increased by late-payment interest and by the abuse-of-law penalties, which run to 80% (reduced to 40% where the authority does not establish that the recipient was the principal beneficiary of the gift or took the principal initiative in it) (Article L. 64 of the Book of Tax Procedures). An 80% surcharge on the eluded duty, plus interest, is what a disguised gift risks when it is unpicked.

The burden of proof lies with the authority. It is for the tax authority to establish that the reassessment is well founded, whether or not the abuse-of-law committee (the comité de l'abus de droit fiscal) has been consulted, and whatever the committee's opinion where it has (Article L. 192 of the Book of Tax Procedures). But the family and estate-planning purpose of an arrangement is no defence: the family and patrimonial interest of an operation presented as a sale for value while it in fact conceals a gift does not prevent the authority from applying the abuse-of-law procedure to disguised gifts (Cour de cassation, com. 7 July 2021, no. 19-16446). The committee has treated as a disguised gift, for example, a "loan" from a mother to her son that carried no term and no interest, that the elderly lender never sought to recover — the hallmarks of a gift dressed as a loan (Cour de cassation, civ. 8 February 2017, no. 15-21366).

The cost of not declaring a genuine gift

Even where there is no sham, failing to declare a genuine manual gift carries its own price. Omitting a manual gift from an inheritance declaration, which is sworn to be true and sincere, exposes the taxpayer to late-payment penalties and to tax fines if the authority proves the gift (Article 784 of the General Tax Code). And there is a "boomerang" cost on any later sale of the asset given: where a manual gift of securities was never declared, the authority is entitled to take a nil acquisition value in computing the capital gain on a subsequent sale, because the recipient cannot produce a declared value to serve as their cost of acquisition (Conseil d'État, 25 November 2015, no. 378004). A gift left undeclared to save duty today can cost far more in capital-gains tax when the asset is sold tomorrow.

The recovery windows are worth remembering too. Where the recipient of a manual gift over €15,000 opted to declare and pay after the donor's death, the authority's power to reassess extends to the end of the sixth year following the death (Article L. 181 A of the Book of Tax Procedures). The overriding lesson of this article is that the cheap and safe course — declaring a genuine gift promptly on form 2735, and structuring a family sale so that it is not a disguised gift — is far less costly than the alternatives the penalties regime holds in reserve.

Frequently asked questions about manual and disguised gifts in France

Do I pay tax on a cash gift in France?

A cash gift is a manual gift, and it becomes liable to gift duty when the recipient reveals it to the tax authority — and, failing that, on the donor's death (Article 757 of the General Tax Code). Whether any duty is actually payable depends on the allowances: each parent can give each child €100,000 free of duty (Article 779, I), and a donor under 80 can give an adult child, grandchild or great-grandchild up to €31,865 in cash under the family cash-gift exemption (Article 790 G), both renewable every fifteen years. A genuine customary gift on an occasion such as a birthday, not out of proportion to the donor's means, is not a gift at all and bears no duty (Article 852 of the Civil Code).

Do I have to declare a bank-transfer gift?

Yes. A gift made by transfer from one account to another is a manual gift, declared by the recipient on form 2735, with payment of any duty, within one month of the gift being revealed to the tax authority (Articles 635 A and 757 of the General Tax Code); since 30 June 2021 the declaration is filed electronically. Even where the gift falls within an allowance and no duty is due, declaring it gives the gift a certain date and starts the fifteen-year clock, so that if the donor lives another fifteen years the gift drops out of the reckoning of later gifts and of the estate (Article 784).

What is a disguised gift?

A disguised gift (donation déguisée) is a gift concealed behind the appearance of an act for value, usually a sale. It is characterised by an impoverishment without consideration and by the intention to give, and it is made out where the form of the sham sale and the substance of a gift are both present. A sale at a derisory price is not a disguised gift, because the imbalance is obvious from the start. Once proved, a disguised gift is not annulled — the transfer stays valid — but it is brought back into the estate and can be reduced if it encroaches on the reserved heirs' shares, and on the tax side it falls under the abuse-of-law procedure.

When does the tax office requalify a gift?

The tax authority requalifies a transaction under the abuse-of-law procedure where an act presented as a sale or other paid transaction in fact conceals a gift (Article L. 64 of the Book of Tax Procedures). A classic case is a sale of bare ownership to a child with a reserved usufruct, which is automatically treated as a disguised gift charged against the freely disposable portion (Article 918 of the Civil Code) unless the parent kept only a right of use and habitation or the other children accepted the sale in the deed. The family or estate-planning purpose of the arrangement is no defence (Cour de cassation, com. 7 July 2021, no. 19-16446).

What are the penalties?

Where a disguised gift is unpicked under the abuse-of-law procedure, the sham act is unenforceable against the authority, the avoided gift duty is reassessed, and the reassessment carries late-payment interest plus abuse-of-law penalties of 80% — reduced to 40% where the authority does not establish that the recipient was the principal beneficiary or took the principal initiative in the gift (Article L. 64 of the Book of Tax Procedures). Failing to declare a genuine manual gift is cheaper but not free: it exposes the taxpayer to late penalties and fines (Article 784), and can lead the authority to take a nil acquisition value on a later sale of the asset (Conseil d'État, 25 November 2015, no. 378004).

How long must the donor survive for a gift to escape inheritance duty?

Fifteen years, counted from the date the gift is given a certain date by being revealed and registered. If the donor dies more than fifteen years after that date, the gift is left out of account in the inheritance duty and the recipient has the full benefit of the allowance then in force (Article 784 of the General Tax Code). The fifteen years only run against the authority from the day the gift is voluntarily registered; a gift that merely surfaces in an audit does not benefit from the rule until it is voluntarily presented for registration (ministerial reply Sauvadet, no. 6251, 21 February 1994).

Can the donor declare the gift instead of the recipient?

The donor can bring the gift to the authority's attention, but it does not make the duty payable — only the recipient's revelation does that (Article 757 of the General Tax Code). A declaration by the donor alone, even a voluntary presentation for registration, does not trigger the gift duty, and it does not relieve the recipient of their own obligation to declare (Cour de cassation, com. 4 December 2007, no. 06-19251). In practice the recipient files form 2735, because it is their revelation that fixes both the date and the tax.

How our French lawyers help with manual and disguised gifts

Most manual gifts are made in a moment — a transfer, a cheque — and their consequences unfold years later, on the donor's death, when the tax and the family accounting finally arrive. We advise donors and recipients on how to make and declare a manual gift correctly, when to use the €15,000 deferral option, and how the fifteen-year recall will play out on a later gift or on the estate. Where a family wants to pass property rather than money, we structure the transaction so that it is a genuine gift or a genuine sale — not a disguised gift caught by Article 918 of the Civil Code and the abuse-of-law penalties — and, where a sale to one child is intended, we build in the consents that keep it safe.

This article is for general information only. It does not constitute legal advice and does not create a lawyer-client relationship. How the rules on manual and disguised gifts apply depends on the assets, their value, the family, and any earlier gifts. Contact our French lawyers for advice on your situation before acting.