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Succession Tax in France
London based company Blevins Franks Tax Limited discusses 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.
If you become resident in France, your worldwide assets will be subject to French succession tax and you may also be liable to French succession tax on any assets you receive as a gift or inheritance. 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 (but not gifts) between married couples and PACS partners are now also 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 make gifts worth more than the set allowances, succession tax is immediately payable – although the main allowances do renew every 10 years.
Succession tax rates, allowances & deductions for 2012
Whereas in the UK the tax is calculated on the overall estate, in France it is calculated for 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
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.
The allowances renew after 10 years.
The value of your main home can be reduced by 20% for succession tax purposes where it is also the main home of the inheritor.
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 10 years, so it may be of benefit to declare them at the time. The gift is taxable if the donor is resident in France, or the recipient is resident in France and has been resident there for more than 6 years. If the gift is French real estate it is taxable even if the donor and recipient are not French residents.
There is a specific exemption for cash gifts of up to €31,865 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. It is also available where the donor is under 80, but only for cash gifts to grandchildren or great grandchildren over 18.
This exemption can be cumulated with other allowances, (i.e. the €159,325 for children and €7,967 for nieces and nephews). It also renews after 10 years.
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 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 January 2012
The 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 must take personalised advice.
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. Blevins Franks Tax Limited only gives taxation advice; all of the advisers are fully qualified tax advisers.
Blevins Franks Tax Ltd