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inheritance tax

Inheritance Tax

Sally Dilks, Associate at Buckles Solicitors LLP, explains why Estate planning for your French assets need not be taxing.

A goal without a plan is just a wish. This familiar phrase applies to many aspects of life and has particular resonance when it comes to deciding what happens to the assets you leave for the next generation of your family.

If you own property in France, it’s vital to seek expert advice on estate planning and the effects of French Inheritance Tax to turn wishful thinking into achievable goals.

 

Sally Dilks

inheritance tax

Brussels IV

The aim of the European Succession Regulation, known as “Brussels IV”, is that where a person owns assets in the EU, their worldwide estate should be governed by a single inheritance law.  However, Brussels IV doesn’t affect Inheritance Tax, so both French and UK Inheritance Tax consequences must be taken into account.

French Inheritance Tax (IHT) works very differently from its English equivalent.  If you are tax domiciled in the UK on the date of your death, then it will be due on any immoveable assets and property contents situated in France.  However, if you die tax domiciled in France, French IHT will be due on your worldwide estate.

French IHT is personal to each beneficiary of the deceased and calculated based on the value of their entitlement and their relationship to the deceased, on the basis of the following current tax-free allowances and French IHT rates:

  • A child of the deceased (descendant) benefits from a tax-free allowance of €100,000. Anything above this is taxed on a sliding scale from 5% to 45%.
  • A parent (ascendant) of the deceased also benefits from a tax-free allowance of €100,000. Anything above this is taxed on a sliding scale rate from 5% to 45%.
  • A sibling of the deceased benefits from a tax-free allowance of €15,932. Anything above this is taxed on a different sliding scale, from 35% to 45%.
  • Non-blood relatives of the deceased and family members beyond the fourth degree are considered as third parties to the deceased. This includes unmarried partners (not in a civil partnership) and step-children.  As such, they benefit only from a small tax-free allowance of €1,594.  Anything above this will be taxed at 60%.

The Due Date

French IHT must be paid within a year of the death on the estate of someone who died outside France, or within six months for someone who died in France.  Irrespective of domicile, a simple physical presence (e.g. whilst on holiday) will trigger the shorter deadline.  Once this date has passed, late payment interest and penalties will start accumulating.

If IHT is paid both in France and the UK then, under the 1963 Double Tax Treaty, it’s possible to apply for double-taxation relief but only once tax has been paid in both countries.  It will then be necessary to ask HRMC to issue a form which must be completed with details of the assets declared and taxed in France.  It must then be returned to HRMC who will liaise with the French tax authorities to confirm the information provided and, once everything is in order, issue the relevant tax credit.

Seek advice from a bilingual firm of solicitors who have extensive knowledge of the French legal system.  They will be able to guide you through the entire process, taking into consideration your assets in France and the UK to identify the best approach for you and your family.

Buckles Solicitors LLP

 

First published in the September/October issue of The Local Buzz

Images: BucklesSolicitors  and Shutterstock