Succession Tax
In France IHT, or inheritance tax, is known as succession tax. If you die resident in France, French tax is payable on all of your assets. Otherwise, succession tax is payable only on assets located in France.
French succession tax is, in theory, paid by each beneficiary, pro rata to the value of net assets received after deduction of all liabilities. In fact there is a subtle aspect to this which affects beneficiaries who are not French resident. The tax is in fact deducted from the amount payable to the beneficiaries, so in effect French succession tax can be collected from UK resident beneficiaries.
There is no longer any succession tax between spouses or couples who have signed a Pacte Civile de Solidarieté (PACS) agreement.
Here is the complete list of current progressive tax rates:
| Between parents and children | Between siblings | |||
| Less than €156,974 | 0% | Less than €15,697* | 0% | |
| The next €7,953 | 5% | The next €24,069 | 35% | |
| €7,953 to €11,930 | 10% | Over €24,069 | 45% | |
| €11,930 to €15,697 | 15% | * This tax-free allowance increases to €156,974 where a sibling is incapacitated and had been living with the deceased for 5 years. | ||
| €15,697 to €544,173 | 20% | Between other relatives | ||
| €544,173 to €889,514 | 30% | Less than €7,849 | 0% | |
| €889,514 to €1,779,029 | 35% | Over €7,849 | 55% | |
| Over €1,779,029 | 40% | Between unrelated persons | ||
| Less than €1,570 | 0% | |||
| Over €1,570 | 60% | |||
Between Couples with PACS* - Further to the Loi No. 2007-1223 inheritance tax between PACS couples has been abolished with effect from the 22nd August 2007
*"The Pacte Civil de Solidarite"
The basic rates of succession taxation do not tell the whole story here. It is impossible to ignore succession law in France when planning for the future. French inheritance regulations differ greatly from our own and deserve a great deal of attention to avoid costly complications at a later stage. The surviving spouse in a marriage is not regarded as the natural beneficiary of the estate. There have been moves over the last few years to improve her or his position, but unless steps are taken this is unlikely to exceed 25% of the net worth of the estate. Helpfully, the position of the surviving spouse has been improved considerably recently with the abolition of inheritance tax between spouses. No change however has been made to succession law.
Succession law in France dictates that children enjoy embedded rights to inherit direct from their parents, to the exclusion of non-blood relatives. Here is a flavour of what you need to take into account:
You must respect the rights of certain heirs ("les héritiers réservataires"):
- If you have one child he or she must inherit at least half your estate.
- If you have two children they must inherit two thirds of your estate.
- If you have three children or more they must inherit three quarters in equal shares.
- If there are no descendants, your parents have the right to reclaim certain gifts. As from 2007, they no longer have the right to a share of your estate.
- If there are no descendants, your spouse - if not divorced - must inherit at least one quarter of the estate.
A key element in planning for the surviving spouse is therefore choosing the right marriage regime rather than relying on the will.
So long as the reserved heirs have their share, you can leave the remainder to whomever you wish, enabling you for example to assist a particular child, relative or friend or maybe even a favourite charity.
This is a complex subject, and we encourage clients to take specialist advice from our trusted contacts in various fields. You can find those contacts on our links page.
There are ways round some of the inheritance problems, especially with regard to passing on savings and investments. Please take a look at our page on investments.
