Money column
How much inheritance and gift tax will your benefi ciaries pay? Rob Kay explains how it works in France
L
ike UK inheritance tax, French succession tax is a tax on gifts and inheritances, but there
are considerable diff erences. If you are moving to France, or just buying property there, you need to spend a little time understanding how it aff ects 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, long- term French residents are
DID YOU KNOW? The value of your main
home can be reduced by 20% for succession tax purposes – but only if
it is occupied as a main home by your surviving spouse/partner or one of your children.
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? Spouses and PACS partners 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 fi rst €8,072 is taxed at 5%, and this climbs over six more bands to 45% for assets over €1,805,677. You have a tax- free 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 Children pay tax on both inheritances and lifetime gifts but benefi t 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 €8,073 to €12,109 €12,110 to €15,932 €15,933 to €552,324
86 FRENCH PROPERTY NEWS: November/December 2023 5%
10% 15%
20%
“Unless you have a formal PACS agreement, unmarried couples are taxed as strangers at 60%”
€552,325 to €902,838 30% €902,839 to €1,805,677 40% Above €1,805,677
45% These rates and allowances
apply to natural and adopted children, but not stepchildren.
Grandchildren The tax rates paid by grandchildren and great- grandchildren are the same as those paid by children, but without the same allowance. Grandchildren receive
an allowance of €31,865 on inheritances and lifetime gifts. You can give an additional
cash gift of up to €31,865 tax- free (if you are under 80 and the recipient over 18). These exemptions renew every 15 years. Great grandchildren, meanwhile, only get a €5,310 allowance for gifts, plus the above-mentioned cash gift.
Siblings If you leave or gift assets to a brother or sister, their tax-free allowance is €15,932. The applicable tax rates are 35% for the fi rst €24,430 and 45% on everything above that. If a sibling is unmarried and has been living with you for the
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