Inheritance Tax in France

As in the UK, inheritance tax in France is probably the main tax where there is room for manoeuvre. Thus, it is deemed a voluntary tax since, with relatively little planning, the tax can be dramatically reduced or even avoided for many people. Inheritance or french succession tax covers taxation on life and death, so there is no separate “gift tax” as in the UK.

How does where you live affects your inheritance tax status?

As we know, under UK law, it is the domicile, the country that a person treats as their permanent home or lives in, that determines where you pay inheritance tax. Many people view British law and determine that it is very hard for one to lose one’s “domicile.” In fact, by moving to France, it is easy, as you lose it immediately once you are a French resident, as agreed by the UK / France double tax treaty. The French have no concept of domicile and view ‘residency’ and ‘domicile’ as the same thing. Thus, if you live in France, you are subject to being assessed for French inheritance tax on your worldwide assets, though what is paid where is ruled by the double tax treaty.

What are the differences between inheritance tax in the UK and France?

One of the main differences between inheritance tax in the UK is that French inheritance tax is applied to the individual and not the estate. This means rather than the estate having a sole tax allowance; it is the individual that has the allowance. If you look at the latest French tax rates page, you will see that the level of allowance varies enormously depending on the relation to the donor.

The allowances are ‘per individual’; thus, the more beneficiaries you have the more can be left behind with no succession tax.

The allowance is reset every 15 years thus, it is possible to gradually give away assets to close relatives, in life, with no inheritance tax, with very long-term planning, but it is clear that other solutions are required, as 15 years is clearly a significant time to plan for.

Inheritance Tax Between Spouses

There is no French inheritance tax between spouses… on death! Many have made the mistake of assuming the fact that there is no longer succession tax between spouses means in life also, and have realised bills they were not expecting, by going over the limit on lifetime gifts to each other. I mention spouses, but this also applies to those who are PACS’ed (a civil solidarity pact between two adults in relation to organising their joint affairs), as they are treated in the same way as married couples.

There are numerous ways and means of reducing inheritance tax in France, and which techniques will suit you will depend on your own situation. There is no one solution that fits all, thus it is imperative to get professional advice when formulating your long-term plan.

What are the inheritance/succession tax rates in France?

As mentioned, the amount of French inheritance tax, also known as ‘droits de succession,’ varies significantly depending on several factors, including the relationship between the beneficiary and the deceased. French inheritance tax is calculated individually for each beneficiary based on their specific inheritance or gift. The tax rates and allowances associated with these transactions are subject to periodic updates by the French government. To determine the exact amount of French inheritance tax applicable to a particular situation, it is advisable to seek professional guidance and consult the latest tax regulations.

How can Kentingtons Help?

As a leading financial and tax advisor in France, Kentingtons has the experience, knowledge and expertise to provide our clients with the most appropriate advice and guidance to help them meet their financial goals while skilfully navigating the complexities of the French inheritance tax system. 

If you would like to know more about how French inheritance tax may affect you and your estate, contact Kentingtons today to see how we can help you.