The basic principles of French inheritance tax law are set out in the Code Général des Impôts (CGI). A distinction is made between unlimited and limited tax liability.
Unlimited tax liability exists if the deceased was resident in France for tax purposes at the time of death (Art. 750 CGI). This is based on the definition of residence for income tax purposes. This means that anyone who has their residence or domicile in France, carries out their main professional activity in France or has the centre of their economic interests in France is liable for tax (Art. 4 b CGI). If this is the case for the deceased, the acquisition is subject to unlimited tax liability in France. The entire estate is subject to French tax law.
Even if the acquirer, i.e. in particular the heir or legatee, was resident in France, the acquisition is subject to unlimited tax liability in France. According to Art. 750 para. 3 CGI, this only applies if the acquirer had his tax residence in France within the meaning of Art. 4 b CGI for at least 6 years within the last 10 years prior to the inheritance.
The limited tax liability an inheritance is subject to French inheritance tax if the above conditions are not met. If only limited tax liability applies, only the inherited assets located in France are subject to French inheritance tax. Taxable domestic assets include, among other things, movable property and real estate located in France, state funds, participations in French partnerships and corporations, securities, provided they are issued by a company domiciled in France, and receivables whose debtors are domiciled in France.
Amount of inheritance tax
The amount of the tax rate is determined by the net acquisition of the individual heir. To determine the specific value, an inventory of the movable and immovable assets must be drawn up and the debts and amounts exempt from inheritance tax deducted from this.
Depending on the relationship of the deceased to the heir or legatee, different tax allowances are granted in France (Art. 779 CGI). The closer the relationship, the higher the allowances:
- For a spouse or PACS partner: exemption from inheritance tax
- One child receives a reduction of EUR 100,000.
- Grandchildren on the death of the deceased's child: EUR 100,000
- Grandchildren in the case of a gift between grandparents and grandchild: EUR 31,865
- Brother or sister: EUR 15,932
- Nephew or niece: EUR 7,967
- Any other person: EUR 1,594
French inheritance tax rates
|
NET TAXABLE AMOUNT |
Applicable tax rate (%) |
Amount to be deducted |
|
Up to EUR 8,072 |
5 |
EUR 0 |
|
from EUR 8,072 to EUR 12,109 |
10 |
EUR 404 |
|
from EUR 12,109 to EUR 15,932 |
15 |
EUR 1,009 |
|
from EUR 15,932 to EUR 552,324 |
20 |
EUR 1,806 |
|
from EUR 552,324 to EUR 902,838 |
30 |
EUR 57,038 |
|
from EUR 902,838 to EUR 1,805,677 |
40 |
EUR 147,322 |
|
from EUR 1,805,677 |
45 |
EUR 237,606 |
The inheritance tax return in France
The inheritance tax return only has to be prepared and submitted by a notary if there is real estate in the estate. If there is no property in the estate, the heirs can also submit a tax return.
If the notary has submitted the tax return, he is also responsible for paying the inheritance tax via a notary escrow account. These costs are, of course, to be borne by the heirs.
The period within which the inheritance tax return must be submitted depends on where the deceased died. If the deceased dies in France, the inheritance tax return must be submitted to the relevant tax office within six months of the deceased's death. If the deceased died abroad, the submission deadline is more favourable. It is then one year from the deceased's death. The inheritance tax return can only be submitted once all taxes have been paid.
Failure to meet the above deadlines will result in monthly penalty interest. The penalty interest amounts to 0.40% per month. After the sixth month of delay, the tax payable is increased once by a lump sum of 10% of the amount owed (or still owed).
The tax office of the deceased's place of residence is generally responsible for the inheritance tax return. If the deceased was not resident in France, the declaration must be submitted to the Service des Impots des Non-Résidents (10 Rue du Centre, 93160 Noisy-le-Grand).
Credit for taxes paid in France
On 2 April 2009, the Agreement between the Federal Republic of Germany and the French Republic on the avoidance of double taxation of estates, inheritances and gifts ratified. The agreement entered into force on 3 April 2009. It applies to the estates of persons who die on or after the date of entry into force of the Agreement and to gifts made on or after the date of entry into force of the Agreement.
Double taxation is avoided in accordance with Art. 11 DTA by both contracting states applying the so-called Crediting method apply. A more detailed explanation is avoided here, as differentiations must be made according to the domicile of the testator and the acquirer. It is therefore not possible to provide an overview.
Offsetting takes place on the basis of the respective national regulations (Art. 784 CGI or Section 21 ErbStG). A higher tax level in the other contracting state may not have a tax-reducing effect, which is why maximum amounts must be taken into account on both sides in the case of reciprocal offsetting. As France has higher tax rates than Germany, this regulation usually only has an effect on the offsetting of French inheritance tax. If you have any questions, please contact your specialist inheritance lawyer in Düsseldorf and Krefeld, Dr Michael Gottschalk.