The Court of Cassation considers taxable a manual gift discovered during a tax audit

Fair a ‘ manual donation” consists of handing over certain goods: jewellery, paintings, furniture, money… Curiously, there is no obligation for the beneficiary, or “donee”, to “reveal” the donation, which is moreover in a certain delay, to the tax administration, while its taxation generates rights, and therefore revenue for the State.

But if he reveals it – because there is interest, for family reasons in particular – he must pay the fees within a month. And if the donation is discovered during a tax audit, what happens? This is the question posed by the following case.

In 2011 and 2012, X receives two manual donations, worth a total of 1.3 million euros, which she was silent. On September 9, 2014, the administration informed him that his family was going to be subject to a tax audit for the period in question. On November 13, 2014, during a first interview with the auditor, X “reveals” her gifts, which she explains come from her “biological father”installed abroad.

Read also: How do you know if a gift is a present of use or a manual gift?

She is asking to pay the duties not within the usual time frame, but within a period of one month following the death of the donor”, as authorized by a special rule of the general tax code (art. 635 A). The administration refuses to do so, considering that this rule only applies when the revelation has been “spontaneous”and not when it is, as in its case, the consequence of a response to a request from the administration or a tax audit procedure”.

Change in case law

Mme X takes legal action, and wins the case, on appeal: the court of Versailles judges, on January 28, 2020, that the revelation took place “before the start of the examination” of his situation. The administration is appealing in cassation. She argues that “the surrender, by the taxpayer, of his bank accounts”which takes place during the first interview of a control, is not a spontaneous revelation. The Court rules in his favor on January 25 (2023, 20-16.700), and condemns Mme X to pay 920,000 euros (60% tax for donation between “non-relatives”surcharge for late declaration, and interest on late payment).

We would have liked to understand how this non-spontaneous admission amounts to a revelation, leading to taxation, whereas, from 2013 to 2016, the Court ruled that the discovery of manual gifts, “in the context of an accounting audit, cannot constitute a revelation”and that these donations cannot be taxed (12-11.642, 12-17.414, 15-19.966).

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