The broadening of the registration requirement, or the so-called "closure of the cheese route" (where 'cheese' refers to the Dutch notarised gift deed), has an impact on Belgians who hold French immovable property through a French SCI (société civile immobilière - Property Investment Company). An SCI is often chosen to optimise the transfer to the children. However, the recent legislative change will have a negative impact on the gift of the shares of an SCI.
Two parents, both 55 years of age and Belgian citizens, jointly hold all shares in a French SCI. The plan is to gift these shares, at a later stage, to their 2 children. The value of the shares is 950,000 Euros. To minimise the gift taxes owed in France, the parents chose a gift subject to usufruct. Upon the death of the parents, the usufruct will end and the children will acquire the full ownership of the shares, free of inheritance tax.
In France, gift taxes are calculated on the value of the bare ownership. As the parents are 55 years of age, this value amounts to 50 percent of the value of the full ownership. Because of the allowance of 100,000 Euros per parent per child that France allows, in this case the French gift taxes can be limited to 7,776 Euros.
The situation after 1 December
If the shares are gifted after 1 December 2020, this gift has to be registered in Belgium too, because it must be executed in the presence of a French civil-law notary. This registration will mean that gift taxes or gift duties are also owed in Belgium. These amount to 3 percent when the parents live in Flanders or Brussels and 3.3 percent when they live in Wallonia. In contrast to France, in Belgium the gift taxes are not calculated based on the value of the bare ownership, but on the value of the full ownership. In this case, in addition to the French gift duties, the children also owe 28,500 Euros in Flemish gift taxes.
How do I avoid double taxation?
By gifting the shares before 1 December 2020, the additional taxation in Belgium will be avoided. If you are the owner of a French SCI and the transfer to the children hasn't yet been optimised, we recommend that you contact one of our specialists. They will happily assist you with your personal situation.