How much inheritance and gift tax will your beneficiaries pay? Rob Kay explains how it works in France
Like UK inheritance tax, French succession tax is a tax on gifts and inheritances, but there are considerable differences. If you are moving to France, or just buying property there, you need to spend a little time understanding how it affects you and your potential heirs. Once you are resident in France, any worldwide assets you give away on death, or as a gift, are liable to succession tax. This applies even if the recipient does not live or intend to live in France. Any French assets you own, such as property, are always subject to this tax, regardless of where you and the recipient live.
French succession tax is calculated on, and paid by, each individual who receives the assets, whether by way of a lifetime gift or as a bequest.
Transfers between spouses and PACS (civil) partners on death are tax-free, but lifetime gifts are not. For everyone else, rates and allowances vary according to their relationship to you in terms of bloodline and marriage. The more distant the relative, the higher the tax rate. Allowances renew every 15 years, which is useful if you want to start making gifts when you are younger.
Under the UK/France inheritance tax treaty, longterm French residents are deemed to be domiciled in France for UK inheritance tax purposes. If you are resident in France when you die, your worldwide estate will be taxable in France, not in the UK. Assets in the UK are always assessable for UK inheritance tax, though you will receive a credit in France for any tax paid in the UK.
HOW MUCH TAX WILL YOUR BENEFICIARIES PAY?
Couples entered into the French equivalent of a civil partnership – pacte civil de solidarité, or PACS as it’s commonly called – are treated the same as married couples.
While inheritances between couples are tax-free, lifetime gifts are taxed at the gift scale rates. The first €8,072 is taxed at 5%, and this climbs over six more bands to 45% for assets over €1,805,677. You have a taxfree allowance of €80,724.
If you deposit cash into a joint bank account, this would not be viewed as a gift to your spouse unless they declare it as such.
Children pay tax on both inheritances and lifetime gifts but benefit from a €100,000 allowance. This is for each child and from each parent.
Additional lifetime cash gifts up to €31,865 are not taxed (provided you are under 80 and the recipient is over 18).
The lifetime gift exemptions renew every 15 years. The 2023 succession tax rates for descendants are:
Less than €8,072 5%
€8,073 to €12,109 10%
€12,110 t
