Inheritance Tax in France
Understand how inheritance tax is calculated in France...
French succession tax is a tax on gifts and inheritances.
Succession tax is paid by each individual beneficiary depending on the amount inherited or received as a gift and their relationship to the deceased/donor. The gift or inheritance is taxable if the deceased/donor is resident in France at the date of death, or if not a French resident, where the asset being gifted or bequeathed is located in France.
Failing that, a gift or inheritance is also taxable if the recipient is resident in France and has been so for at least six of the ten years prior to the year in which the gift or inheritance is received.
There is no succession tax on inheritances between spouses and PACS partners, but tax is still due on life-time gifts over the available allowance (see below). The allowance is renewable every 15 years.
This inheritance tax exemption extends to sisters and brothers who are single, widowed or divorced providing that at the time of succession they are aged more than 50 or are suffering from an illness which prevents them from working, and they were living with the deceased during the five years preceding the death.
Succession tax rates for 2016 Taxable inheritance to spouses and PACS partners (gifts only; inheritances are tax free):
|Taxable inheritance||Tax rate||Tax on band (€)||Cumulative Tax (€)|
|Less than €8,072||5%||€404||€404|
|€8,073 to €15,932||10%||€786||€1,190|
|€15,933 to €31,865||15%||€2,390||€3,580|
|€31,866 to €552,324||20%||€104,092||€107,672|
|€552,325 to €902,838||30%||€105,154||€212,826|
|€902,839 to €1,805,677||40%||€361,135||€573,961|
Taxable inheritance in the direct line, including adopted children but not step-children unless adopted:
|Taxable inheritance||Tax rate||Tax on band ( €)||Cumulative Tax ( €)|
|Less than €8,072||5%||€404||€404|
|€8,073 to €12,109||10%||€404||€808|
|€12,110 to €15,932||15%||€573||€1,381|
|€15,933 to €552,324||20%||€107,278||€108,659|
|€552,325 to €902,838||30%||€105,154||€213,813|
|€902,839 to €1,805,677||40%||€361,135||€574,948|
Taxable inheritance: siblings and other relatives and non-relatives:
|Taxable inheritance||Brothers & Sisters||Other relatives to the 4th degree||More remote and non-relatives|
|Less than €24,430||35%||55%||60%|
Allowances for 2016
- Spouses/PACs partners - gifts (inheritances exempt): €80,724
- To each natural or adopted child from each parent: €100,000
- To each natural or adoptive parent: €100,000
- To a grandchild (gifts only): €31,865
- To a great-grandchild (gifts only): €5,310
- To a sibling: €15,932
- To an unmarried sibling living with the deceased (see above): fully exempt
- To a nephew/niece (gifts and inheritances): €7,967
- To any other person: €1,594
- To any disabled person - additional to above: €159,325
The allowances renew every 15 years for life-time gifts, so gifts up to the available allowance can be made every 15 years tax-free.
The living representatives of a deceased descendant share that descendant's allowance between them in addition to their own allowances. Unmarried couples are taxable as ‘strangers’ and so have an allowance of only €1,594 unless they have entered into a PACS agreement, the French version of a civil partnership, open to both same-sex and heterosexual couples in France.
PACS partners are entitled to a deduction of 20 percent from the value of the main residence in the same way as a married couple. Couples who have entered into a UK civil partnership are treated as PACS partners in France.
The value of the main home can be reduced by 20 percent for succession tax purposes provided the property is also occupied as a main home by the surviving spouse, PACS partner, or by children of the deceased.
If shares are held in a qualifying business, the value is reduced by 75 percent in calculating the tax due. The deceased must have held the shares for more than two years, the heirs must keep these for four years and at least one heir must either work full time in the business or exercise the function of a director for the next three years.
In the case of a quoted company, the deceased must own 25 percent, or 34 percent of the equity if unquoted.
Where the beneficiary has three or more children, they can reduce their French inheritance tax bill by the following amounts:
- €610 per child, but only for the third and subsequent children, where the inheritance came from a parent or spouse
- €305 per child, but only for the third and subsequent children, where the inheritance came from a more distant relative
Payment of succession tax
Succession tax returns have to be filed within six months where the death was in France, or within one year if outside France.
Tax returns are not required where the value of the inheritance (before deduction) is less than €50,000 in the direct line and between spouses and PACS partners, or €3,000 in all other cases.
Generally, succession taxes are payable within six months from the date of death, at the latest. A beneficiary can apply to pay the tax in equal instalments at maximum intervals of six months over a maximum period of one year. Interest is charged at the official rate of interest in place at the time the application is made. This rate remains unchanged for the total period of payment.
The instalment period can be extended to three years where at least 50 percent of the inheritance is non-liquid assets (such as real estate, unquoted shares, business assets, patents, and so on). If the property in question is sold, then the succession tax becomes payable immediately.
Gifts Tax in France
French gifts tax automatically applies to gifts that are required to be made formally by deed or with judicial recognition. A lifetime gift by manual transfer (eg cash) should be registered with the tax authorities on Form 2735 and the tax paid within a month.
Note that when manual gifts are disclosed to the tax authorities at the time of the donor’s death, the value of the gift for gift tax purposes will be the value at the time of the disclosure (i.e. at the time of the death) or at the time of the gift if higher.
In addition, for manual gifts disclosed at the time of the death, the starting point of the familial exemptions renewable every 15 years is the time of the disclosure.
There is an additional specific exemption of €31,865 for outright cash gifts where the gift is made to a child, grandchild or, if there are no direct line descendants, to nieces or nephews.
This is provided the donor is less than 80 years old and the donee more than 18 years old. In addition, the gift should be declared and registered by the donee at their local tax office within one month.
This exemption can be cumulated with other allowances, (e.g. the €100,000 for children, the grandchildren’s general €31,865 gift allowance or the €7,967 for nieces and nephews). It renews every 15 years, i.e. cash gifts totalling up to €31,865 can be given to each child every 15 years tax free.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
Blevins Franks are the leading international tax and wealth management advisers to UK nationals living in Europe. Visit www.blevinsfranks.com