Unlike English inheritance tax, French inheritance tax (namely “droits de succession”) is paid by each beneficiary (not by the deceased’s estate) by reference to the value received after deduction of all liabilities.
In the past, beneficiaries were obliged to pay off the inheritance taxes within six months of determination of the estate. However, some relief is available now as the tax authority is able to grant up to ten years (five years if not child/grandchild of deceased) to pay the taxes due, provided some form of guarantee can be offered, and on condition that at least 50% of the inheritance is in the form of non-cash assets. Interest is charged on the outstanding sum. Where the non-cash assets are less than 50% of the inheritance, then the taxes are due within six months of determination of the estate.
Rates and allowances vary between each class of beneficiary. This means that where a deceased’s estate is split between for example, surviving spouse and children, the amount each party would inherit may vary substantially, as the levels of the tax-free allowance and the rates of tax applicable can be completely different.
If you die domiciled in France, French inheritance tax is payable by each beneficiary on their share of your worldwide assets. If you die domiciled outside France, then only your assets in France are liable to French inheritance tax.
Inheritance tax between spouses
A transfer on death between married couples is exempt from inheritance tax. Otherwise, unmarried couples will be taxed at a rate of 60% with the minimum tax-free allowance on anything that the survivor inherits from the deceased.
However, if you are not married but you (and your spouse) are residents in France (or are French nationals) , it is worth signing a PACS agreement, as you will be exempted from inheritance tax, like married couples. The PACS (pacte civil de solidarité) is a cohabitation agreement for unmarried couples, whether a same-sex or heterosexual couple. It has been in force since 1999.
As mentioned before, only French residents or French nationals can complete a PACS. Up until recently, France has not recognised an English Civil Partnership Act agreement (CPA), and therefore a same sex couple having completed a CPA in the UK would have suffered substantial discrimination in relation to assets in France or passing under French law. This position has now changed, such that no inheritance tax will be applied to any assets passing under French law between partners having completed a CPA.
French inheritance tax rates
As mentioned above, the inheritance tax is paid by the beneficiaries and therefore is personal to each beneficiary. The rates and allowances vary between different classes of beneficiary.
The thresholds for the tax bands are regularly updated in the annual French finance legislation. However, for your information, please find herewith the last tax tables updated 2011.
The thresholds for 2011 are as follows:
- 159,325 € each parent to each child (or child to parent).
- 15,932 € between brothers and sisters. However, there are important concessions for brothers and sisters who were living under the same roof as the deceased: indeed they escape liability to inheritance tax on the triple condition that:
- they are either single, widowed, divorced or separated,
- over 50 years of age or infirm,
- and that they have been living with the deceased for at least the last 5 years preceeding their death.
- 7967 € to nieces and nephews.
- 1594 € to third parties (non-blood related)
- 159,325 € for a registered disabled person, whatever their relationship to the deceased. This allowance can be added to any other allowance to which this person may ordinarily be entitled by virtue of blood link. Thus, a disabled child is entitled to an allowance of 159,325 € as well as a further 159,325 € from each of their parents.
- There is an allowance of 20% for the main residence of the deceased is granted, provided the property was normally occupied by the surviving spouse, and/or the children, at the time of death.
Tax inheritance rates (figures updated on 2011)
Taxable Amount Tax Rate Up to 8,072 € 5% 8,072 to 12,109 € 10% 12,109 to 15,932 € 15% 15,932 to 552,324 € 20% 552,324 to 902,838 € 30% 902,838 to 1,805,677 € 40% Greater than 1,805,677 € 45%
- Brothers and sisters are taxed at the rate of 35% for sums up to 24,430 €, and thereafter at the rate of 45%, after allowance of 15,932 €
- Relatives up to the fourth degree are charged at a flat rate of 55% (after tax-free allowance)
- Relatives above the fourth degree or other beneficiaries who are not related to the deceased by blood or marriage pay a maximum rate of 60% with a minimum level of tax-free allowance.
- Others inheritors are taxed at the rate of either 55% or 60% (after any allowances) depending on their relationship (if any) to deceased.