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Tax Benefits from Donations to Charity

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In many countries, your generosity is rewarded by the tax man, and donations towards tax deductible charities in France is no exception.

Your donations can bring you tax benefits in the case of different kinds of taxes. Amongst these are income tax, wealth tax and inheritance taxes.

However, be aware that not all charitable organisations are recognised in the same way for the benefit of tax rebates.

By Yvonne Drolshagen, President of Aquitaine Lifestyle Solutions

Which Charities?

Firstly, the charity must be officially recognised as a “general-interest body” which means having a philanthropic, educational, scientific, social, humanitarian, sporting, family or cultural purpose, or they must make contributions to the national heritage or support the environment. It might also be a recognised association or foundation of public utility, and certain cultural or charitable associations are authorised to receive donations and bequests.

Donations to these recognised charities are tax-deductible and can give you tax relief for income tax of 66%, with an upper limit of 20% of your taxable income1.

A charity may qualify for an even higher income tax credit if that association provides free meals, medical care or promotes housing for people in difficulty in France or abroad, such as The Red Cross, Restaurants du Cœur, Secours Populaire or Secours Catholique, amongst others. This law, often named “Loi Coluche” referring to the famous French actor who founded the Restaurants du Cœur, allows a 75% tax relief, limited to a maximum donation of 537€ corresponding to a maximum tax advantage of 403€. All donations over this limit can be carried over to the tax credit that applies for the “general interest” charities.

If the charity is located in another European country, or a country being a part of the European economic area and having a double tax convention with France, the same rules apply.

To know if a charity qualifies for these tax rebates, you should ask the charity if they can provide a receipt indicating the allowed tax rebate.

 

In the case of wealth tax (IFI), your donation is tax efficient up to an amount of 50,000€ and 75% of your donation is tax deductible. The list of organisations, foundations or associations that give this type of tax credit is much larger than those for income tax purposes, and other rules apply if you have also made investments in SME or in the social and solidarity economy.

If you want to leave a legacy to a charity organisation, the legal setup of the charity is important as the charity organisation might be totally exonerated from inheritance taxes, or end up with a tax rate of 60% depending on their statutes. If you want to make such a legacy, you should discuss this point with your financial advisor.

Note[1] : revenu fiscal de référencewww.aquitaine-lifestyle-solutions.com

For example: Mr Dudley, a French tax resident, has made a donation of 50,000€ to the Restaurant du Cœur. His taxable income1 is 100,000€. On his income tax bill this donation will produce a tax credit of 403€ (Loi Coluche) and 13,200€ under the general rules. The same donation will reduce his wealth tax liability by 37,500€.

www.aquitaine-lifestyle-solutions.com

First published in the March/April issue of The Local Buzz

Images: Shutterstock and Aquitaine Lifestyle Solutions