But how will a PACS affect you from a tax standpoint? Its primary impact is on income tax and wealth tax as well as gift and estate taxes. Those interested in forming a PACS should be aware of its potential impact on their tax liability before signing. First of all, with regard to income tax, the partners are subject to joint taxation beginning in the third year after they register their PACS. In other words, those who registered a civil solidarity pact in 2000 will be taxed jointly on their 2003 income. The tax return is signed by both partners and filed under both names. The tax authorities may claim the entire income tax liability from either partner, and either may be subjected to tax audits in the future. Employed same-sex partners who wish to deduct actual work-related commuting expenses may do so, although in the past this option was reserved for heterosexual couples. In the event that the PACS is formally ended, each partner once again becomes personally liable for tax on income earned during the year of the break-up. The partners are also taxed jointly for the wealth tax, but in this case joint liability takes effect in the first year of the pact. They both sign the return and are jointly liable for payment of the tax and any subsequent audits. With regard to gift taxes, partners who have been in a registered civil solidarity pact for at least two years enjoy an allowance of €57,000. Above that amount, the tax authorities assess a 40% tax on the first €15,000 and a 50% tax thereafter. We should note that in addition to these specific rules governing civil solidarity pacts, a number of broader provisions are relevant as well. For example, the tax authorities "forget" gifts after ten years. Once this ten-year period has passed, taxpayers may once again take advantage of the €57,000 allowance on gifts. Tax reductions are also granted on the basis of the donor's age: the younger the donor, the lower the tax. An additional reduction is awarded if the recipient of the gift (the donee) has more than two children. For example, let's assume a person under the age of 65 donates in fee simple an asset valued at €75,000. The gift tax liability will be €3,750 if the donor and donee have been joined in a registered PACS for at least two years. Otherwise their tax bill for the transaction would be €22,050. Note that if these partners marry, even one hour before the gift is made, they pay nothing at all! Lastly, the tax rules governing estate tax are the same as those for the gift tax, except that the age-specific reductions are not applicable to estates. The tax benefits (allowances and lower tax rates) become available as soon as the PACS is registered – there is no waiting period. Civil solidarity pacts should not be entered into lightly, so don't hesitate to direct any questions you may have to your notaire. Ask him or her to assess your personal circumstances and assets in order to choose the solution that's best suited to your wishes.