Inquire
In the context of an inheritance or gift involving a foreign element (for example, when the donor or the beneficiary resides abroad, or when the gifted asset is located outside the country), the question arises as to which tax regime applies: in which country should inheritance or gift taxes be paid?
The principle
The French rules governing the taxation of gifts and inheritances are set out in Article 750 ter of the General Tax Code. However, these rules apply only subject to the tax treaties concluded between France and certain foreign countries with the aim of avoiding double taxation.
Good to note: You can find all tax treaties signed between France and foreign countries on the official website impots.gouv.fr, under the “International” section.
What should be done if no international tax treaty exists?
In the absence of an international tax treaty, reference must then be made to Article 750 ter of the French General Tax Code, which sets out the territorial rules applicable to transfer duties free of charge (inheritance and gift taxes).
Thus, this article provides that the transferred assets are taxable in France:
- When the donor or deceased person has their tax residence in France
- When the assets are in France, even if neither the donor or deceased nor the beneficiaries or heirs have their tax residence in France.
- When the beneficiaries, heirs, or legatees have been tax residents of France for at least six of the ten years preceding the transfer.
Note: The concept of tax residence is defined in Article 4B of the French General Tax Code (CGI). It refers to the location of the taxpayer’s home or principal residence, main professional activity (unless it is secondary), or the center of their economic interests.
In the first and third cases mentioned above (where the donor or deceased resides in France, or where the beneficiary or heir resides in France), taxation applies in France on all assets, whether located in France or abroad.
It is therefore possible for the person receiving an asset to be taxed both in France and abroad.
Article 784 A of the French General Tax Code therefore allows the offsetting of foreign inheritance or gift taxes paid against the amount of tax owed in France.
In the second scenario (where neither the donor/deceased nor the beneficiary/heir has their tax residence in France), transfer duties free of charge are payable only on movable and immovable property located in France.