Inheritance tax in France

Scope of application of French inheritance and gift tax law

French inheritance tax regulations apply if

• the deceased is resident in France for tax purposes or
• the donor or donee has been resident in France for tax purposes for at least six of the last ten years or
• the assets to be transferred are located in France

Determining the tax liability

Determining the taxable acquisition

The first step is to determine what the transferee has acquired from the deceased by reason of death and the amount of the enrichment. In the case of an heir located abroad, only the estate located in France is taxable in France.

Acquisition

The acquisition of the heir includes all rights and liabilities of the deceased that do not expire upon death.

Important: If the deceased is survived by his/her spouse, a distinction must be made between the assets of the deceased and those of his/her spouse. Only the testator’s assets are inherited and therefore taxed!

The acquisition of the legatee, on the other hand, only includes the object of the legacy (e.g. vacation property).

Inheritance tax rates and allowances

Inheritance tax percentages

French inheritance tax law uses a progressive system that is linked to the value of the net assets transferred. This means that only the value of the inheritance received is taken into account, not the deceased’s total assets. Furthermore, the relationship between the heir and the testator is decisive.

Taxation is as follows:

Beneficiaries of the spouse or children and their descendants

• Up to € 8,072 = 5 %
• € 8,072 – € 12,109 = 10 %
• € 12,109 – € 15,932 = 15 %
• € 15,932 to € 552,325 = 20 %
• € 552,325 to € 902,838 = 30 %
• € 902,838 to € 1,805. 677 = 40 %
• From € 1,805,677 = 45 %

Beneficiaries of siblings

• Up to € 24,430 = 35 %
• Over € 24,430 = 45 %

Beneficiaries of distant relatives and other persons

• Relatives up to the 4th degree = 55 %
• Relatives from the 5th degree and other persons = 60 %

Allowances

The allowances depend on the relationship between the heir and the testator. The allowances are as follows:

• Children and their descendants €100,000
• For siblings €15,932
• For nephews or nieces €7,967
• Any other person €1,594

Spouses are completely exempt from inheritance tax. There are also other exemptions linked to French civil servant status or certain assets.

It is also important to note the tax relief on the inheritance of companies or shareholder shares. These can be exempt from tax by up to 75% if the beneficiary also assumes the obligations arising from the inheritance.

Avoiding double taxation by offsetting

A double taxation agreement has been in place between Germany and France since 2007. If the acquirer or the testator was resident in France for tax purposes or if the estate includes assets in France, German inheritance tax may be payable in addition to French inheritance tax. In such cases, double taxation can often be avoided or mitigated by offsetting. As a rule, however, French taxation will take precedence. In this case, the French inheritance tax will exceed the German inheritance tax. This means that there is no longer any entitlement to payment of German inheritance tax in Germany.

Declaration of French inheritance tax

In the event that French inheritance tax applies to the inheritance, anyone who benefits or is burdened by it must submit a tax return to the relevant tax office. The competent tax office is either the tax office in the district where the deceased lived or the higher-level Service des Impots des Non-Résidents if the deceased was not resident in France. This can be done either by the heir himself or by a notary. If a property was inherited, the tax declaration must be made by a notary. The deadline depends on the place of death of the deceased. If the deceased died within France, the deadline is 6 months. If the deceased died outside France, the deadline is 12 months. However, the tax return can only be submitted once the inheritance tax has been paid.