France is among the countries that rely the most on inheritance tax as a proportion of their revenue – and anyone who moves here or owns a property here may at some point be affected by this.
That could be either as a recipient of an inheritance, from France or abroad, or because you are writing your will.
The first point to note is that the tax varies in amount and in level of tax-free allowance dependent on the heir’s relationship to the deceased – for example, spouses pay no tax and stepchildren and friends 60%, after a low allowance.
There have recently been proposals for modifications to the bands and allowances. However, it remains to be seen whether any become law.
President Macron promised, prior to re-election in 2022, to raise the tax-free allowances for children and grandchildren.
He also pledged to boost allowances for siblings, nephews and nieces, and to help stepchildren.
Read more: What are the rules on gifting a property in France?
Inheritance tax allowances
‘Allowances’ are the amount that can be passed on before the remainder is assessed for tax, usually using bands at increasing percentage rates depending on the size of the bequest.
Despite the promises, no proposals materialised in French budget laws for 2023 or 2024, or in the 2025 law which is going through parliamentary debate.
However, there are many proposed amendments by MPs relating to inheritance tax (droits de succession) as well as the related issues of gift tax and such ‘alternative’ ways of passing on money as naming people as beneficiaries of an AV (assurance vie – life assurance policy).
Depending on the MPs’ politics, some proposals aim at lightening taxation, some at increasing it, and some are a mixture, such as helping indirect heirs/stepchildren, while creating a new 45% top bracket for the richest direct heirs.
The bill must be agreed on by MPs and the Senate before the end of the year.
Proposed reforms
Reforms were also recommended by state auditor the Cour des comptes, which advises lightening tax on indirect-line recipients and stepchildren.
It proposed balancing this with reducing advantages for beneficiaries of AV or of a 75% allowance for passing on a business.
Governments justify taxing inheritances on grounds they are ‘unearned wealth’, and to help redistribute wealth so it is not concentrated in rich families.
In its 2025 budget France expects to raise €15 billion from this, plus €4 billion from gift tax.
Gift tax
France is not alone in levying a gift tax (droits de donation): this exists in the US also, for example. It aims to avoid the wealthy passing on most of their wealth in their lifetime and the family, thus avoiding inheritance tax.
The UK does not have a gift tax, but when a person dies, large gifts they made in the previous seven years may be taken into account.
France encourages some lifetime gifts by offering allowances per recipient that are renewable every 15 years, for example €100,000 for direct heirs. Gift tax has allowances and rates similar (but not identical) to inheritance tax.
Note that French inheritance tax is a separate issue from inheritance law.
The latter refers to rules around how property may be left. For example, a person’s estate could be subject to Californian law but still assessable for French inheritance tax.
In cross-border inheritances, however, taxation will differ depending on whether a treaty on inheritance tax exists between the other country and France.
A list exists here (the version in the other country’s language can be found with a web search).
Usually, these treaties are separate from standard double taxation ones dealing with matters such as income or capital gains tax. They may or may not also deal with gift tax (this is the case with the US).
French inheritance tax is payable as part of the formalities after the death and the amounts payable by each heir will be assessed by the notaire dealing with the estate, after application of allowances, tax bands and rates which vary depending on the recipient’s relationship to the deceased.
This is different from UK tax, which comes off the estate as a whole before share-out. Many parts of the US have a mixed system.
Spouses and civil partners do not pay. Direct heirs pay on the part above €100,000 at seven bands rising from 5% up to €8,071 of taxable inheritance, to 45% on any taxable part above €1,805,677.
Those unrelated, or relatives ‘beyond the fourth degree’, are taxed at 60% after a low €1,594 allowance.
There is one exception: an additional inheritance/gift tax allowance of €159,325 for recipients unable to work due to disability, regardless of relationship.
Read more: Explained: 2024 inheritance tax for family members in France
Assets and clauses
As to which inheritances attract French tax, this depends on where assets are located and where the deceased and recipients have their main home.
If the deceased was French-domiciled, beneficiaries are liable to pay French tax on all assets received, located in France or abroad, unless an exemption applies (for example due to a clause in a treaty).
If the deceased was not a French tax resident, then, if the beneficiary was a French tax resident on the date of the deceased's death, and had been living in France for at least six of the previous 10 years, they are eligible to pay inheritance tax on assets received, located in France or abroad.
However, rules for assets from abroad can vary if there is an inheritance tax treaty (this is the case, for example, between France and the US and the UK).
If the beneficiary is not a French tax resident, then only certain assets located in France (notably real estate) are taxable.
The US-France treaty allows that most forms of US-situated assets from a US resident, are not taxable for a recipient in France. The UK-France treaty does the same.
Yet there is no law specifically exempting such inheritances from having to be declared in France to the recipient’s tax office.
The only official exemptions are for children or spouses where the total value of the deceased’s estate was less than €50,000, or for other beneficiaries if the estate was worth less than €3,000.
One tax lawyer stated there could be a moderate fine for not filling in the forms, but it would not be at a percentage of the (untaxable) inheritance.
A simulator can give an estimate of the amount of inheritance tax you would be liable to pay on the death of a close relative, which you can find here.
Illustration provided by Perry Taylor: perrytaylor.fr
The Connexion publishes a help guide to Inheritance Law and Wills in France, available for €14.50 here.
