France > Living in France > inheritance tax
Expat Finances - Inheritance tax and gift tax in France
Section kindly contributed by Steven Grover - see contact details at the bottom of this page if you would like further information.
How do the recent changes in the Inheritance/Gift Tax law affect me?
On the 13th July 2007 a new law which is being introduced from 1st January 2008 makes considerable changes to existing French Inheritance/Gift Tax Laws has been adopted be the French parliament.
What does it change?
• Inheritance Tax between married couples and those with a PACs (Pacte Civil de Solidarité) agreement on first death will no longer be applicable, before limit was set at €76,000 for married couples and €57,000 for PACs partners.
• The allowance for children & parents of the deceased has now been increased from €50,000 (per child) to €150,000 (per child) • Brothers & sisters of the deceased can now receive €15,000 each before Inheritance tax.
• Nephews & nieces of the deceased will also now be able to receive €5,000 each before Inheritance tax.
• No Inheritance Tax between Brothers & Sisters who reside at the same address.
• Limit of the amount that can be left to a disabled person who is not a direct heir has been changed from €50,000 to €150,000.
• It is now possible under the new Gift Tax laws to donate €150,000 per child every 6 years without incurring any Gift Tax.
• You are also able to donate €30,000 to a member of family (from their 18th Birthday) without incurring any Gift Tax.
What has not changed?
In France, assets pass according to French succession law rather than by will, and this favours any children of the deceased rather than the spouse (between 50% and 75% of the deceased’s assets must pass to the children). PACS partners and unmarried partners have even fewer rights to the property. This can be circumvented, but if no action is taken to provide for the spouse, they are only entitled to 25% as of right. Any unreserved balance can be left according to your will. For UK residents, this rule will apply to the French property only; if you are French resident, it applies to your worldwide assets, except for real estate situated outside France.
Where assets are taxed in both countries, under the UK/France inheritance tax treaty, tax should be paid in the country where the property is located, and you can offset this against the tax due in the country of residence to avoid double taxation, even though the UK taxes the estate and the French tax the recipient.
If you are French resident, from a UK point of view, you will be regarded as if you were domiciled in France, because of the UK/France treaty mentioned above. Therefore, only your UK assets will be subject to UK inheritance tax, with an appropriate double tax credit in France for any UK tax paid.
If you are UK resident and domiciled and own a property in France, the French property will be subject to UK IHT as part of your estate, and as it is located in France, it will also be subject to French succession tax, with an appropriate tax credit in the UK.
A few amendments to this law have already been proposed, and these details were only correct at the time of writing. The information is only provided as a guide and, if you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.
If you have a question, want to arrange for a free financial review or just want further information I can be contacted on +33 (0)325461631 or at Steve@financialexpat.com
Financial Expat is registered and licensed in France under the European wide “umbrella group” of TSG insurance Services (The Spectrum IFA Group).
TSG Insurance Services S.A.R.L. Siège Social: 34 Bd des Italiens, 75009
Paris « Société de Courtage d'assurances » R.C.S. Paris B 447 609 108
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Source - www.mon-epargne.com
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