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PROPERTY

Could France be about to relax its strict inheritance rules?

The French inheritance system is complicated and highly regulated, with high inheritance tax for certain cases. However Bruno Le Maire, the French Economy Minister, has hinted at a possible reform to the rules.

French President Emmanuel Macron and his Economy Minister have suggested that they want to reduce inheritance tax in France.
French President Emmanuel Macron and his Economy Minister have suggested that they want to reduce inheritance tax in France. (Photo by Ludovic MARIN / AFP)

French law has rules in place on who you can leave property or money to and effectively rules out disinheriting your children – find full details on how the rules work HERE.

But as well as the limits imposed by the law, the French tax system is also weighed in favour of direct parent-to-child inheritance – or succession en ligne direct in French. 

On Monday, the French Economy Minister Bruno Le Maire suggested that this was unfair. 

“If you leave [wealth] to a nephew that you love very much, or to a niece, the tax is extremely high. It is very penalising,” he told LCI

His comments came less than a week after President Emmanuel Macron told Le Parisien: “We must help people to share a modest inheritance”.

“I am not among those who think we need to increase inheritance tax – I am the opposite,” he said.  

This could be simple electioneering. But it could also point towards a future policy change. 

READ ALSO Wills, estates and notaires – what you need to know about French inheritance law

What are the current tax rates? 

The amount of tax you have to pay for inheritance depends on your link to the deceased. 

If you were married or Pacsé (in a civil partnership), you are exonerated from paying any inheritance tax. Couples who are living together but are not married or pacsé get no special dispensation and pay tax at the standard rates for non-relatives (see below). 

If you are the sibling of the deceased, you are exonerated from paying tax if you meet all three of the following conditions at the time of the death:

  • You have lived with the deceased on a permanent basis in the five years leading up to the death;
  • You are single, widowed, divorced or separated;
  • You are older than 50 years old or have a medical condition that means you cannot work. 

For children inheriting from their parents and vice versa, there is no need to pay any tax on an inherited estate valued at less than €100,000. This rule also applies to grandparents inheriting from their grandchildren – but not the other way around. 

After that, the tax on inheritance is anywhere from 5 percent to 45 percent depending on the value of wealth inherited. 

The tax rates for children inheriting from their parents differ according to the value of the estate inherited. Source: service-public.fr

The same rates of tax also applies to people inheriting from their grandparents or great grandparents – although the initial tax free allowance is set lower, at €1,594. 

For inheritance between siblings who do not meet the exoneration conditions set out at the beginning of this section, there is an initial tax-free allowance of €15,932. After that inheritance worth less than €24,430 is taxed at 35 percent. Inheritance worth more than this is taxed at 45 percent. 

READ MORE What are the rules on inheriting property in France?

Nephews and nieces can inherit €7,967 tax free but afterwards must pay an inheritance tax of 55 percent. If they are inheriting in the place of one of their parents (who has either died or has renounced their right to inheritance), nephews and nieces face the same tax rates as siblings of the deceased. 

Great nephews and nieces, great uncles and aunts, and cousins can inherit up to €1,594 tax free and then must pay a 55 percent inheritance tax on anything above this. People who are more distantly related to the deceased or not related at all have the same tax-free allowance and then must pay a flat 60 percent inheritance tax. 

If you are disabled, the tax free allowance increases by an extra €159,325. If you were injured in war (to the degree that the French state considers you 50 percent disabled), you can also receive a 50 percent reduction of the amount of tax to be paid on inheritance – although this reduction is capped at €305. 

How is the taxable value of the inherited estate calculated? 

The savings plus estimated value of the property and goods of the deceased are added together. 

Debts, outstanding loans,  taxes owed, and rent due by the deceased are subtracted from this amount – as long as they were already valid at the time of death and can be proved. Funeral fees of up to €1,500 can also be subtracted from the overall value of inheritance. These debts must be declared on the déclaration de succession – a document that any inheritor must sign. 

Then the inheritance is divided up, according to the rules outlined below. As previously mentioned, different tax rates apply depending on the inheritor’s relation to the deceased. 

There is an online simulator to help you calculate the amount of inheritance tax you will have to pay. 

What are the rules on who can inherit? 

The French law states that children of the deceased must receive a share of the inheritance. 

The share they receive depends on the number of children. One child is entitled to half their deceased parent’s estate. Two children share two-thirds, and three or more share three-quarters. The surviving husband or wife has a right to at least one quarter of the succession. Those who were in a PACS partnership or were living with the deceased as a couple (en concubinage) have no automatic rights to inheritance if the deceased had children. 

If you are the surviving husband/wife of the deceased, you normally have the right to remain living at the property, if it was owned or co-owned with the deceased. 

But if you were married to the deceased and shared ownership of a property with other people, you only have the automatic right to remain living there for one year following the death. 

If you were in a PACS partnership with the deceased, you have the automatic right to stay in the property for one year following the death if you were co-owners of the property or if the property was entirely owned by your partner (unless your partner has written you out of their will).

If you were living as a couple with the deceased (en concubinage), you do not have the automatic right to remain living at the property as the law states that inheritance must go to children or other family members as a priority. 

Special rules apply if the deceased didn’t have children. 

If the deceased was married, without children, but both their parents are still alive, half the inheritance goes to the parents and half goes to the husband/wife. 

If just one parent is still alive, one quarter goes to the parent and three quarters go to the surviving husband/wife. 

If neither parent is alive, the surviving husband/wife receives all of the inheritance. 

In the case that the deceased was unmarried and without children, the inheritance is split between surviving parents and siblings. If there are no parents or siblings, the inheritance is split between more distant family members as a priority. 

For more on the rules of inheritance, click HERE.

Rules for foreign residents and second home owners

Whether you live in France or own assets such as property here, you need to decide whether to have your Will administered under French law or the law of your home country.

If you have a Will and your main residence is in another country, your French property can usually be disposed of according to the law of that country, it is advisable to add a Codicil to your Will stipulating that you want your home country’s laws to apply.  

READ MORE Is my non-French Will valid in France?

If you decide to have your estate managed under the laws of your country of birth, you may not have to guarantee that your children receive a fixed share of inheritance. It could also potentially save you having to pay French inheritance tax – although you should get legal advice on this from a notaire or avocat.

To find out how to make sure any previous Wills are still valid in France, click here

If you want to create a new Will in France, any notaire should be able to help you do so – typically for €136. 

You can also register your existing Will with a notaire – this is free if the notaire has prepared the Will – and that ensures that everything is in place for a smooth process for the family after the death.

When could a change to the rules come about? 

The recent comments from Le Maire and Macron were not concrete policy proposals – mere hints as a willingness to lower rates in the future. They did not address French legal obligations to pass a fixed share of the inheritance onto the children of the deceased. 

Reforming inheritance law would be a large legislative challenge and a touchy political subject in France. 

In May 2021 The Financial Times ranked France as having the most billionaires through inheritance of any country in the world. 

A study from France’s Council of Economic Analysis found that the most wealthy 0.1 percent in France “barely pay 10 percent of inheritance taxes on the overall estate inherited, far from the marginal 45 percent tax rate for people inheriting €1.8 million through direct succession”. 

At the same time, the majority of people inherit relatively small amounts. 

“50 percent of individuals will receive less than €70,000 in inheritance throughout their life. Among them, a large fraction will inherit nothing at all,” notes the study. 

The council, which advises the French government has warned that France has become “a society of inheritors” which “carries the risk of a profound destabilisation of the equality of opportunity.” 

On the left of French politics, Jean-Luc Mélenchon, the presidential candidate of the France Insoumise party, wants to limit the maximum value of an estate that can be inherited to €12 million. On the right, Valérie Pécresse, the presidential candidate of The Republicans party wants to cut taxes in a similar vein to Le Maire and Macron. 

Any change to the law is extremely unlikely before the presidential election in April this year. 

Note – this is general advice only, for specific questions on estate planning or Wills, please contact a legal expert. 

The Notaires de France website also offers useful advice in English, while a list of English-speaking notaires in France is available here.

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PROPERTY

The post-Brexit tax rules on selling second-homes in France

British second-home owners in France who want to sell their properties are being warned of an extra layer of administration - and expense - in place since Brexit.

The post-Brexit tax rules on selling second-homes in France

Brits wishing to sell property in France may now need to appoint a représentant fiscal (tax representative) in France in order to properly declare the sale to French tax authorities. 

Who?

This law applies to people who own property in France but do not live here – mostly that would be second-home owners but it could also apply to, for example, anyone who has inherited property.

This requirement has always been the case for non-Europeans such as Americans, Canadians and Australians and now also applies to Britons since the end of the Brexit transition period. People who live in another EU or EEA country are exempt.

The law is based on residency, not nationality. So if, for example, you have your main residence in the UK but have an Irish passport, you would still be covered by this requirement.

Exemptions

As well as EU residency, there are a couple of other exemptions;

  • If you sell your property for less than €150,000
  • If you have owned the property for more than 30 years (in which case the sale is exempt from capital gains tax and social security contributions).

What is a représentant fiscal?

This is simply a representative for tax purposes in France, and the person does not need specific qualifications in law or accountancy.

The following can be appointed:

  • A company or organisation already permanently accredited by the tax authorities;
  • A bank or credit institution operating in France;
  • The buyer of your property, if they are domiciled in France for tax purposes (they do not need to be a French citizen);
  • Any other individual who is domiciled in France for tax purposes (they do not need to be a French citizen) – in this case they will need to be accredited by the local authority;
  • If the property is in Paris, the individual will need to be accredited by the Île-de-France tax authorities – département de Paris-Pôle gestion fiscale Centre-Missions foncières, 6 rue Paganini, 75020 Paris. Tel: 01 53 27 46 45

If you decide to appoint an individual rather than a company as your représentant fiscale, bear in mind that the process can be quite complicated, so it would be better to check that they are confident in dealing with the tax authorities, to ensure that you don’t end up with unfinished business with the tax office.

If you chose a company, they will naturally charge for the service. 

Whichever representative you chose, you will need to provide a dossier of documents relating to the property sale and also confirming that you are a tax resident of a country outside France (tax returns, banking information, for example).

Will you have to pay tax on the proceeds of the sale?

If your main residence is not in France, you have no other income in France and you do not complete the annual French tax declaration you will not usually have to pay tax in France on the proceeds of the sale, provided your total estate is worth less than €1.3 million.

Properties worth more than €1.3million may be liable for the impôt sur la fortune immobilière (property wealth tax).

You will of course have to declare the income from the sale in the country where you are resident and, if applicable, pay capital gains tax.

What about French property taxes?

If you have owned property in France you will have been paying the taxe foncière and taxe d’habitation.

These will cease, but bear in mind that taxe foncière is charged based on who owned the property on January 1st of the relevant tax year. So if you sold your property in February 2022, you will still get a tax bill in autumn 2022 to cover that year. Only the following year will the new owner become liable, unless the sale contract for the property included an agreement to share or split outstanding taxes.

Find more information on the Internationals section of the French tax office website HERE or pay a visit to your local tax office in France. Find your local office by searching ‘Centre des Finances publiques’ plus the name of your commune – tax offices are open to the public on a walk-in basis and the staff are usually friendly and helpful. 

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