Succession and Inheritance Tax in France

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Succession and Inheritance Tax in France

Succession Tax

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 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 6 of the ten 10 years prior to the year in which the gift or inheritance is received.

There is (since 22 August 2007) 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). 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

Taxable inheritance to spouses and PACS partners (gifts only):

Taxable inheritance in the direct line, including adopted children but not step-children unless adopted:

Taxable inheritance: siblings and other relatives and non-relatives:

Allowances for 2009

• Spouses - gifts (inheritances exempt): €79,221
• Partners under PACS - gifts (inheritances exempt): €79,221
• To each natural or adopted child from each parent: €156,357
• To each natural or adoptive parent: €156,357
• To children on your divorce (up to age 18): €2,700 pa, per child
• To a grandchild (gifts only): €31,271
• To a great-grandchild (gifts only): €5,212
• Cash gifts to a child, grandchild or possibly nephew/niece
  • subject to donor's/donee's ages
  • non-renewable: €30,390
• To unmarried brother/sister
  • over 50 or invalid
  • who has lived with deceased for at least the last five years (gift only): €79,221
• To a sibling not covered above €15,636
• To a nephew/niece (gifts and inheritances) €7,818
• To a nephew/niece by representation of a sibling €15,636
• To any other person €1,642
• To any disabled person - additional to above €156,357

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 a €1,642 unless they have entered into a PACS agreement, the French version of a civil partnership, open to both same and opposite couples in France. If a PACS agreement is broken before the end of the year following the year it was entered into, for motives other than marriage of the couple or death of one of the partners, the allowance will be denied and the tax relief clawed back. PACS partners are entitled to a deduction of 30 per cent from the value of the main residence in the same way as a married couple is.

The allowances (with the exception of the one-off cash gift allowance) all renew every 6 years for lifetime gifts. Gifts up to the available allowances can thus be made every 6 years tax-free.

Deductions

The value of the main home can be reduced by 30 percent for succession tax purposes provided the property is also occupied as a main home by the surviving spouse, PACS partner, or by one or several children.

If you have shares in a qualifying business, the value is reduced by 50 percent in calculating the tax due. The deceased must have held the shares for more than two years, the investors must keep these for six years and at least one heir must either work full time in the business or exercise the function of a director for the next five years.
If a quoted company, the deceased must own 25 percent, or 34 percent of the equity if unquoted.

Family reductions

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 taxes are generally payable within 6 months from the date of death.

A beneficiary can apply to pay the tax in equal instalments at maximum intervals of six months over a maximum period of five years (depending on the amount of tax payable). 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 ten years where a child is the recipient provided at least 50 percent of the inheritance is non liquid assets (such as real estate, unquoted shares, business assets, patents etc.)

If the property in question is sold, then the succession tax becomes payable immediately.

Gifts Tax

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 does not necessarily have to be declared and taxed, although such gifts are brought into account when inheritance tax is computed if the donee is also a legatee of the estate.

Where a gift is made manually there are two choices:

1. The gift is not registered at the time it is made, but when the donor dies, the gift is accumulated with any inheritance received from the same person. The beneficiary is obliged to declare any previous gifts received from the deceased.
2. The gift is registered by the beneficiary and the tax (if any) is paid. When the donor dies, the gift is ignored if it falls outside the 6 year cumulation period.

Gifts of full-ownership or usufruit where the donor is under 80

The tax payable on gifts in full-ownership (or of a life-interest - usufruit) is reduced by 50 percent if the donor is under age 70. If the donor is between 70 and 80 years of age the tax payable is reduced by 30 percent.

Gifts of nue-propriété where the donor is under 80

Where a gift of nue-propriété is made, with the donor retaining the usufruit, tax is payable on the value of the nue-propriété gifted.

On the death of the usufruit holder, the usufruct and nue-propriété are joined, with no liability to succession tax in France.

Cash gifts

The specific exemption for cash gifts where the gift is made to a child, grandchild or, if there are no direct line descendants, to nieces or nephews is €30,390 (for 2009). This is provided the donor is less than 65 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 of the gift.

This exemption can be cumulated with other allowances, (for example, the €156,357 for children, €30,390 for grandchildren and €7,818 for nieces and nephews), but does not renew after six years and can thus only be used once.

Declaration of Inheritance

It is not obligatory to accept an inheritance in France. The delay for accepting or refusing an inheritance is five years.

At the point of accepting to inherit assets, a declaration of inheritance (déclaration de succession) must be made for tax purposes - either by the heir or a notaire representing their interests.

Reporting limit

The direct heirs (children, surviving spouse or PACS partner) do not need to declare the inheritance if the gross assets of the estate are less than €50,000. Other heirs (such as siblings, aunts and uncles) do not need to report the inheritance if their share is less than €3,000.

Note: If an insurer requires a "certificate of non-payment of inheritance" in order to release the funds, a standard declaration will have to be filed.

Filing the declaration

The heir must complete and sign the appropriate declaration forms. Heirs may each complete their own declaration, or each sign a joint declaration, or designate the task to a chosen representative. Each is individually responsible for payment of their taxes.

Various personal documents should accompany the declaration.

• Full information from the Government tax authorities: Click here (in French)

If the deceased was resident in France then the declaration must be filed with the local tax office (Service des impôts des enterprises, SIE) of the deceased's place of residence.

If the deceased was not resident in France but owned property or assets in France then filing should be made at the non-residents' tax office (Centre et recette des impôts des non-résidents).

• Centre et Recette des Impôts des Non-résidents
  At: 10, rue du Centre, TSA 60 015, 93465 Noisy-Le-Grand Cedex
  Tel: 01 57 33 83 00
  Fax: 01 57 33 83 50
  e-mail

If the deceased was a resident of Monaco, filing should be made at the SIE in Menton.

• Service des impôts des enterprises, SIE
  At: 7 Rue Victor Hugo, 06507 Menton

Related Information

• See AngloINFO INFOrmation Page Will Making in France

Extract from INFOrmation Page French Taxes: Wealth, Inheritance/Succession, Gift and Property Tax by Blevins Franks Tax Advisory Service
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