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Succession Tax in France  London based company Blevins Franks discuss the costs and complications of inheriting assets in France. While the comparisons are UK based, the information concerning the French law applies no matter where you come from. France imposes an inheritance and gifts tax – “Succession Tax” – but there are substantial differences between the French system and the UK inheritance tax regime. Anyone buying property or living in France will want to know how much it will cost their beneficiaries. This tax also affects you if you become resident in France and then inherit assets in the UK or elsewhere.
Summary If you become resident in France, your worldwide assets will be subject to French succession tax. If you remain resident in the UK, only your French real estate will be taxable. In the UK no inheritance tax is payable between married couples or Civil Partners (except where the deceased was UK domiciled but the survivor is not). In France inheritances between married couples and PACS partners are now exempt from succession tax. For non-spouse inheritances, the UK currently has a £325,000 allowance, under which no tax is payable regardless of who the beneficiaries are. The French rules are different for non–spouse inheritances where the allowance varies according to the beneficiary's relationship with the deceased. In the UK if you gift assets and survive seven years no inheritance tax is payable. In France, if you give away gifts worth more than the set allowances, succession tax is immediately payable – although the main allowances do renew every six years. Succession tax rates, allowances & deductions Whereas in the UK the tax is calculated on the overall estate, in France it is calculated on each beneficiary individually. The rates vary according to the relationship between the donor and the beneficiary as well as the cumulative value of the assets inherited by each beneficiary: Spouses and PACS partners (gifts only)
Direct Line Relatives
Others
Unmarried couples are taxed as non-relatives, unless they enter into a PACS agreement. You need to be French tax resident to do this. It is worth looking into the PACS and Community Marriage Contracts in France to see how they may lower the succession tax bills in France. Allowances Available
The Allowances Renew After Six Years The value of your main home can be reduced by 30% for succession tax purposes where it is also the main home of the inheritor (so this would normally only benefit married couples). Nowadays PACS partners can also benefit from this deduction. If you have more than three children, their succession tax bill is reduced by €610 per child for the third and subsequent children (if they are inheriting from a parent). Gifts Succession tax applies to gifts as well as inheritances, but declaration is only compulsory for gifts that are required to be made by deed or with juridical recognition. However, all gifts not covered by life-time allowances need to be taken into account if the donor dies within six years, so it may be of benefit to declare them at the time. The gift is taxable if the donor is resident in France. If the gift is French real estate it is taxable even if the donor and recipient are not French residents. If the donor is aged between 70 and 80 there is a 30% reduction in the amount of tax payable. If under 70, this increases to 50%. Cash Gifts There is a specific exemption for cash gifts of up to €31,395 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 65 years old and the donee more than 18 years old at the time of the gift. In addition, the gift should be declared and registered by the donee at his/her local tax office within one month. This exemption can be cumulated with other allowances, (i.e. the €156,974 for children and €7,849 for nieces and nephews). However, it does not renew after six years and can only be used once. Gifts or Inheritances From Overseas Since 1999 French residents are taxable on gifts or inheritances received from persons not domiciled in France. The gift does not have to take place in France, nor does the donor have to be resident France. This provision only applies where the heir, donee or legatee has been tax resident in France for 6 of the 10 years preceding the year when he received the gift or inheritance. There is a Double Tax Treaty covering inheritance taxes between France and the UK but it only covers inheritances passing on death; it does not cover life-time gifts. Avoiding Succession Tax Whilst anyone would want to try and avoid this tax if they could legally do so, we do recommend that you seek expert advice as the laws are complicated and you will want to make sure you get it right from the outset. We’re sure that if you can possibly help it you would prefer not to leave your beneficiaries an extra tax bill, but care does have to be taken – the international tax experts at Blevins Franks will be able to explain the succession tax rules in more detail and guide you through the options (such as Assurance Vie, Trusts and Usufructs) for mitigating this tax. It’s important to plan ahead if you’re moving to France or buying property there. Too many people don’t think about the consequences, with the result that they either miss out on opportunities to reduce tax, and/or leave their spouses and children with much complicated paperwork to wade through in France. But with a little foresight and the right advice you can get your planning sorted from the outset; so you and your family can enjoy your property in France knowing that you won’t have to face headaches and unnecessary tax bills in the future. Updated June 2010 For more information on any of the above issues,
contact Blevins Franks is a leading pan-European financial advice group, which provides integrated tax, wealth management and estate planning services to private clients in the UK, France and around the world. Blevins Franks Tax Limited advises British foreign property owners and expatriates, both prior to and following their departure from the UK. Blevin Franks Tax Ltd |
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