30 Jan 2025
Inheritance tax in France is a critical element of estate planning, particularly for those inheriting or passing on wealth. The system is based on the relations between the deceased and the heir and the value of the estate, with particular exemptions or allowances governed by French law.
Resident or nonresident, it’s no secret that these rules are essential in helping you understand the often complex process. In some cases, heirs might be in need of money transfer services like ACE Money Transfer across borders to settle the estate or distribute assets.
French inheritance tax applies to a wide range of assets, including real estate, financial accounts, investments, and personal belongings. Residents of France are taxed on their domestic and foreign assets alike.
Only assets located in France are taxable for nonresidents. Under the principle of forced heirship, a significant duty of the estate must be distributed to a surviving direct descendant, whether he or she is a child or a grandchild, and the remainder may be disposed of at the discretion of the deceased.
Taxable inheritances include not only the assets at the time of death but also certain lifetime gifts that were not taxed earlier. How to calculate tax is one thing while understanding the taxable base is one aspect to achieve accurate tax calculation and taxation compliance.
The taxation rate in France is dependent on who the heir to the deceased is. Children and grandchildren are entitled to €100,000 tax-free allowance per heir as a direct descendant. As for the taxes, they occur between 5 and 45% depending on the inheritance value beyond this. Siblings can get up to €15,932 tax-free allowance rates from 35% to 45%. Nephews and nieces get a tax-free allowance of €7,967, but 55% over is taxed at a flat rate. Inheritances are taxed at 60% for unrelated heirs, and the tax-free allowance is just €1,594.
The key exemptions from French inheritance law are given. Spouses and civil partners are entirely exempt from French succession tax, regardless of the estate’s value. Charitable donations are exempt from hereditary tax, encouraging philanthropic bequests. Specific operational conditions can cause family businesses to be eligible for reduced rates or exemptions.
Careful planning is essential to minimize liabilities associated with French estate tax. Lifetime gifts are also an effective way to reduce taxable estates, and children can receive €100,000 every 15 years tax-free. This is particularly valuable since the Irish tax credit rates for lifetime gifts are very high compared to the UK and some of the other jurisdictions we work in.
Setting up trusts or life insurance policies can also reduce inheritance tax burdens. It is highly recommended to consult a tax advisor familiar with French law, particularly if the estate involves cross-border assets or heirs affected by the new French inheritance law for non-French residents.
Heirs may also need to use services to send money to beneficiaries in different countries, such as using ACE Money Transfer for payments to loved ones across borders.
Discussions around French inheritance tax reforms have gained momentum in recent years. They propose to mend wealth inequality by simply tinkering with allowances and rates. While no major reforms have been implemented yet, it’s essential to stay updated on potential legislative changes that could impact the succession tax in France.
For non-residents, there is additional complexity that needs to be complied with, which relates to French inheritance law and the applicable bilateral tax treaty. They may help shield French-based assets from paying double taxation. Tax experts say that non-residents who are inheriting property or assets in France should consult with a tax expert. In some cases, non-residents may need to send money online for easier and faster transfers of inherited funds, especially if they are based abroad.
Navigating inheritance and taxes in France requires a clear understanding of the applicable rules, exemptions, and strategies for reducing liabilities. Preparation before you plan your estate or receive an estate won’t save you from paying too much in estate and gift taxes, but a little bit of knowledge can go a long way toward meeting a sound planning objective. Using modern tools for online money transfer can also make the process of transferring inheritance funds more efficient.
Heirs receiving assets from a deceased person’s estate are responsible for paying inheritance tax.
Yes, spouses and civil partners are fully exempt from inheritance tax, regardless of the estate's value.
All children are entitled to a tax-free allowance of €100,000 on inherited property.
Residents are taxed on income located in France. Bilateral treaties are largely used to skip double taxation.
Under the right circumstances, yes, family businesses can get tax breaks or state tax reductions.