How much is French inheritance tax and what are the allowances?
Understanding how French inheritance tax applies to residents and non-residents
Unlike the UK, French inheritance tax is applied to the individual inheriting the assets rather than the estate itself
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French inheritance tax (droits de succession) applies when a person dies, with tax levied on their worldwide assets if they are residents in France.
Non-residents are taxed on property located in France, usually real estate plus other assets depending on the country they were living in.
For UK residents, this includes French-registered businesses or cars, and furniture or art.
Inheritance tax exemptions and allowances
Unlike the UK, French inheritance tax is applied to the individual inheriting the assets rather than the estate itself.
The rate of tax depends on the relationship between the deceased and the beneficiary and there are several exemptions and allowances.
A surviving spouse, UK civil partner or French pacs partner, is fully exempt from inheritance tax. However, inheritance tax will be applied to their heirs when the remaining estate is passed on.
Under certain conditions, siblings living in the same home as the deceased may be exempt from inheritance tax.
They must meet criteria such as being over 50, disabled, or having lived with the deceased for the past five years.
Heirs with physical or mental disabilities which prevent them from working have an allowance of €159,325, which can be combined with other allowances.
Some assets, like gifts to recognised charities or certain historic monuments, may be exempt from inheritance tax.
Special exemptions also exist for forests, farmland, and businesses under specific conditions.
Deductions from the estate
Before calculating the net value of the estate, several costs can be deducted including:
Inheritance tax rates
After costs and allowances are applied, the remaining estate is divided into shares and taxed at a progressive rate based on the relationship between the deceased and the beneficiary. Here are the key thresholds:
Direct heirs: for children and parents (plus grandchildren may share between them their parent's allowance if he or she has died or has renounced it in favour of their child/children) the first €100,000 is tax-free.
The tax rate then increases progressively: 5% up to €8,072, 10% up to €12,109, 15% up to €15,932, and higher rates up to 45% for larger estates.
Brother or sister: if not eligible for exemption as above, the tax free allowance is €15,932. Above this a tax rate of 35% applies up to €24,430 then 45% beyond this amount.
Nephew or niece: the tax free allowance is €7,967 with amounts over this taxed at 55%.Other beneficiaries
Other beneficiaries: for extended family members such as cousins or great-nephews, the tax-free allowance is €1,594 then a 55% tax rate is applied.
All other beneficiaries have the same tax-free allowance but a tax rate of 60% is then applied.
Payment of French inheritance tax
Inheritance tax must be paid within six months of death if the deceased resided in mainland France (12 months for those outside France).
Payments can be made in cash, by cheque, or, with agreement, using other assets like works of art. If the estate includes non-liquid assets (like real estate), beneficiaries can opt to pay in instalments with interest.
Lifetime gifts and their taxation
Lifetime gifts (donations) are taxed the same as for inheritance except for spouses or civil/pacs partners.
Here, tax rates begin at 5% for gifts under €8,072 rising to 45% for those over €1,805,677.
Once again there are specific allowances depending on the family link:
Child: €100,000 allowance per child.
Registered disabled people (under certain conditions): €159,325 allowance.
Spouse/civil partner: €80,724 allowance.
Grandchild: €31,865 allowance.
Great grandchild: €5,310 allowance
For siblings and nephews or nieces, the lifetime gift allowance amount is the same as their inheritance tax allowance.
Lifetime gifts received in the 15 years prior to the death will reduce the beneficiaries tax-free allowance.
