Gifts / Inheritances
The application of gift and inheritance taxes is identical to that of wealth tax.
Gifts and inheritance are taxable in France:
- where they concern an asset located in France; or
- where the deceased (donor) or the heir (donee) is resident in France for tax purposes (the heir / donee must have been domiciled in France for a period of 6 of the previous 10 years;
- in other cases, solely as regards real estate located in France.
ðThus, gifts or inheritances relating to real estate located in France or to shares in companies dealing mainly in real estate are generally taxable in France.
Since the Finance Law 1999, Article 750 ter of the FTC has used a very wide-ranging notion of assets located in France as regards shares in companies dealing mainly in real estate where more than 50% of the shares are held by the same family group (antecedents, descendants, spouses, brothers and sisters of the spouse).
The following are thus considered taxable in France under the gift/inheritance tax regime:
- shares in French companies, whether dealing mainly in real estate or otherwise;
- shares in foreign companies or entities (e.g. trusts, foundations, etc.) where 50% of the assets consist of buildings located in France (not assigned to their own industrial, commercial or agricultural use or to the exercising of a non-commercial profession) in proportion to the value of such assets compared to the total assets of the company: the tax administration assesses the real estate proportion solely in relation to the French assets;
- shares in foreign companies or entities (e.g. trusts, foundations, etc.) where 50% of the shares are owned by the same family group directly or indirectly holding buildings in France (not assigned to the owning company’s industrial, commercial or agricultural use or the exercising of a non-commercial profession) in proportion to the value of such assets or shares or the rights representing such assets within the total assets of the company or entity.
This wide scope of application may cause potential conflicts in the allocation of assets, where for example a foreign company dealing mainly in real estate in France may be considered as both liable to gift tax in the country where its registered office is located (as movable property) and to gift tax in France.
Certain tax treaties however provide special rules for the taxation of inheritances and even gifts (however, unlike the treaties governing the taxation of income (profits) or capital, these are fairly rare).
The general regime applicable is that governing French residents, subject to local adaptations (see hypertext link: Individuals > Gifts / Inheritance).