Inheritance: why it is essential to report gifts properly

011. Artificial intelligence in the audit of estates

Since 2020, a specialised team within the National Directorate for Tax Status Audits (DNVSF) has dealt with the estates and gifts involving the largest financial stakes. Its members include officers with notarial training, able to grasp the civil law and tax aspects of a transfer of wealth, which are sometimes complex.

This specialisation is part of a wider modernisation of tax audits. The tax authorities increasingly use artificial intelligence and data mining to analyse a considerable volume of data, identify inconsistencies and select the cases that require in-depth human review. In 2024, close to 45% of tax audits of individuals are reported to have been opened on the basis of detections arising from data analysis.

For estates, these tools make it possible to match information obtained at different times and from different sources. The tax authorities can, for example, compare the returns filed on the death of each parent, and also check them against data on bank accounts, safe deposit boxes, life insurance policies, real estate and financial accounts held abroad.

Ficoba lists the bank accounts opened in France and the rental of safe deposit boxes. Ficovie holds more detailed information on life insurance and capitalisation contracts, including their subscription, their updated value, changes of beneficiaries and their termination. In addition, automatic international exchanges give the tax authorities access to information on several million financial accounts held outside France.

To identify estates that have not been reported, a digital assistant uses data from Ficoba and Ficovie in particular. The results feed the “Suivi succession” application, which is used to select the cases to follow up. A first informal letter can be sent to the heirs from the seventh month after the death, before any formal notice.

Artificial intelligence allows the tax authorities to bring out links that would have been much harder to identify before, by automatically matching banking, insurance, asset and tax return data that are sometimes several years apart.

In this new environment, a gift that was omitted or poorly documented is more likely to be identified when the estate is settled. Yet, because of the fifteen-year look-back (rappel fiscal), a gift made less than fifteen years before the death can directly affect the allowances available and the duty payable by the heirs. It is therefore essential to report gifts properly as soon as they are made, including where no duty is payable immediately.

022. The look-back makes reporting gifts indispensable

When an estate is settled, gifts made by the deceased during the fifteen years before death must, in principle, be taken into account in calculating inheritance tax.

This mechanism, known as the rappel fiscal, is used in particular to determine the portion of the allowances already used by each heir.

For example, a child is in principle entitled to an allowance of €100,000 on transfers received from each parent. If the child received a gift of €60,000 less than fifteen years before the death, only €40,000 of allowance will, in principle, remain available for the estate.

A gift may therefore have triggered no tax when it was made, because it was covered by an allowance, and still have a direct effect on the duty payable on death.

This is why it is important to report gifts properly when they are made, including where no duty is immediately payable. Reporting the gift in particular:

• gives the gift a definite date for tax purposes;
• starts the fifteen-year period;
• evidences the use of the allowances;
• makes it easier to reconstruct past gifts when the estate is settled;
• limits the risk of challenge, tax reassessment, late payment interest or penalties.

This is particularly important where there is an international element. Depending on the tax residence of the donor or the recipient, the location of the assets and the applicable tax treaty, a gift made abroad may have to be reported in France even where no French duty is ultimately payable.

03Key points

Tighter audits and automated cross-checking of data make past gifts much easier to detect when an estate is settled. Even where a gift gives rise to no tax, it is therefore advisable to check straight away whether it must be reported in France, and to keep all the supporting documents.

A return filed at the right time not only complies with the applicable tax obligations, but also secures the calculation of duty on the future estate.