Passing on assets with a foreign element
Gift or estate with a foreign element: which State taxes what, estate tax treaties, and double taxation of transfer duties.
Contents
The situation
A parent who died abroad, heirs in France. Property abroad within a French estate. A child living in France receiving a gift from a parent who stayed abroad.
The heirs then face two administrations claiming duties on the same estate, and a notary who cannot settle the point alone because it is a tax and treaty question.
What the rules say
Article 750 ter of the French tax code uses three connecting factors.
| Connecting factor | Extent of French taxation |
|---|---|
| Deceased or donor resident in France | all assets, in France and abroad |
| Asset located in France | that asset, whatever the residence of the parties |
| Heir or donee resident in France | the assets received, subject to a minimum period of residence in France |
Treaties on inheritance and gift tax are rare and narrow in scope. Where none applies, duties paid abroad may be credited against the French duties within the limits set by the code.
What the firm does with those rules
The work is usually done beforehand, and that is where it is worth most: identify the connecting factors that apply to the family as it actually is, check whether a treaty exists, cost the different transfer scenarios, and set the timing of gifts.
It also concerns the interaction with civil law: the European succession regulation allows the law governing the succession to be chosen, which is a question distinct from tax. Confusing the two is the most common mistake.
Afterwards, it means preparing the return, obtaining the credit for foreign duties and, if there is disagreement, challenging the assessment.
Frequently asked questions
Are duties paid abroad credited against French duties?
Within the limits set by the tax code, and on proof of payment. The credit is capped at the French duties on the assets located abroad.
Does the law governing my succession also govern the tax?
No. The choice of succession law and taxation follow two different logics and two different instruments.
Is a gift from abroad to a child resident in France taxed?
It may be, subject to the donee’s period of residence in France. That is a timing parameter.
Does the French business transfer relief work with a foreign company?
The regime can apply subject to conditions, in particular as to the activity and the location of the company.
This article sets out a general framework and is no substitute for a review of your file: every situation has its own dates, figures and documents.