Inheritance tax

The death of a person, and the transmission of his estate to his heirs, can trigger inheritance tax. The inheritance tax is calculated in the inheritance tax return, this is a form established by the tax administration.

The calculation of inheritance tax goes through several stages. Once the heirs are identified, the taxable assets are listed and the tax rate is determined.

In the event of non-compliance with the deadlines for filing the declaration of inheritance and payment of inheritance tax, interest and penalties are due to the tax administration.

The declaration of inheritance must contain the enumeration and estimate of the assets depending on the inheritance and the deductible liabilities. The declaration must mention any donation made by the deceased and accepted by the donee before the death, this is the tax reminder of donations. Since 2012, the tax reminder period for donations has been 15 years.

After the inventory of the asset, we determine the taxable part of the succession which goes to each heir according to their rights in the succession.

Taxation varies depending on the family relationship between the deceased and the heir.

Some heirs are exempt from inheritance tax. This is the case for the surviving spouse and the partner linked to the deceased by a civil solidarity pact (made heir by a will).

Likewise, brothers and sisters may be exempt under certain conditions (whether they are over 50 years of age or have an infirmity that prevents them from supporting themselves at the time of death and that they lived with the deceased for the 5 years preceding the death.)

The children of the deceased are not exempt from inheritance tax. However, they each benefit from an allowance of 100,000 euros on the share inherited, unless it has been used in a gift registered within 15 years to the death. After application of this allowance, the portion received by the children is taxed according to the following scale :

Up to 8,072 euros: at the rate of 5%

Between 8,072 euros and 12,109 euros: at the rate of 10%

Between 12,109 euros and 15,932 euros: at the rate of 15%

Between 15,932 euros and 552,324 euros: at the rate of 20%

Between 552,324 euros and 902,838 euros: at the rate of 30%

Between 902,838 euros and 1,805,677 euros: at the rate of 40%

Beyond 1,805,677 euros: at the rate of 45%.

About brothers and sisters, when they are not exempted from inheritance tax, they benefit from an allowance of 15,932 euros. Beyond that, the portion received is taxed according to the following scale:

Up to 24,430: at the rate of 35%

Beyond: at the rate of 45%.

About the other relatives of the deceased:

Parents up to the 3rd degree benefit from an allowance of 7,967 euros. Beyond that, they are taxed on the part received at the rate of 55% (except if they come by representation in which case they benefit from the rate between brothers and sisters).

Parents from the 4th degree and heirs unrelated to the deceased beneficiary of an allowance of 1,594 euros. Beyond that, the part received is taxed at the rate of 60%.

Deadline for filing the declaration of inheritance and paying the tax

The declaration of inheritance is sent with the payment of the tax to the locally competent tax service within six months of the death if it occurred in France and within the year of  the death if it occurred abroad.

If this deadline is exceeded, the tax administration applies late payment interest of 0.20% per month of delay on the amount of inheritance tax plus a penalty of 10% from the 13th month from the death outside France.

It is possible to pay the tax in seven fractions over three years at mort when the estate includes illiquid assets ans to defer payment when the assets are collected in bare ownership only.

The heirs have to declare all the gifts they received from the decedent . The gifts which have been registered since more than 15 years before the death are not taken into account for calculation of inheritance tax.

Certain specifics assets benefit from a favourable tax regime. This is the case for forests and agricultural land, under certain conditions.

Forests are exempted up to 3/4 of their market value on condition that:

• the declaration of succession is accompanied by a certificate attesting that the forests concerned are likely to present one of the guarantees of sustainable management;
• the parties make a commitment for themselves and their successors:

–  to respect a sustainable management plan for 30 years

– or to present such a plan within 3 years from the transfer and to apply it until the expiry of the 30-year period.

The exemption up to 3/4 of rural properties leased on a long-term basis is subject to the condition that:

• the property remains the property of the heir or legatee for 5 years from the date of transmission,
• the lease has been granted for more than 2 years to the beneficiary of the transmission, to his spouse or to one of his descendants,

If the value of the transferred goods exceeds € 300,000, the partial exemption is reduced to 50% above this limit.

Territoriality of inheritance tax:

In the absence of bilateral tax treaties concluded by France to avoid double taxation, the applicable rules are as follows:

If the deceased had his tax residence in France:

All his movable and immovable property wherever located is taxable in France.

If the deceased did not have his tax residence in France:

Asset located in France are taxable in France.

And all movable and immovable property located in France and abroad are taxable in France if they are received by an heir or legatee who has his tax residence in France and who has had his tax residence in France for at least six years within the ten years preceding the death.

The amount of tax paid abroad for the same assets located abroad is charged against the tax payable in France.