French tax payable on a uk inheritance

[Gyn_Paul]

Am I right in assuming that a French resident, receiving a sum as an inheritance from a UK estate, simply declares it on their tax return in the following year and that it is treated like any other unearned income (ie. subject to the usual tax/cotisation charges) ?

Or would it be treated differently and charged at a separate rate?

We're not talking a pool's win here; something like £40k

p

[chessie]

Interesting question - one I think could well affect quite a substantial number of UK ex-Pats in the next few years....

More info is needed I think.

Would this be a one-half, one-quarter share-out of a total inheritance ?  If so, if original amount (before share-out) was over UK IHT threshold, then tax would have been paid on estate in UK. Wouldn't the double tax treaty agreement mean that there shouldn't be any tax to be paid in France ? Or is this where we have an unfair anomoly between France and UK.

In the UK any inheritance (below IHT threshold) is Not taxed.

It would seem to be extremely unjust that a UK ex-Pat has to pay tax on an inheritance that - in the UK - would not be taxed.........why should tax be paid to the French Tax people on what is UK money that belonged to a deceased UK resident person ?

I, too, would love to know the answer - because it is something I know I will have to face some time in the next few years....

Chessie

[The Truth Fairy]

I took advice from my pet tax specialist who works in the Impots in Paris when I inherited from a UK resident (I am French resident and have been for years) and they said no need to declare or pay anything. But of course as soon as you bring the money to France if you don't spend it straight away you get social charges on the unearned income.

(The value of the estate was under just IHT level and my share was about 1/3 of that).

[cooperlola]

My information was that if you have lived here for less than 5 years it is tax exempt - this was true when my sister died last year.  If not, normal French inheritance rules apply (ie it varies, according to how/if the person was related to you).

I can vouch for the first part of my statement, but somebody else should clarify the latter.

[The Truth Fairy]

Gyn-Paul I've checked this with the  experts in Paris and there is an arrangement by which tax on inheritance is paid in the country where the inheritance is situated: so if it's in the UK, whether it be money or property, that's there. However, the minute it starts earning income: either if you let a property or simply invest the dosh, then it becomes liable for tax in your place of residence.

So the answer to your original question is a resounding NO! You DO NOT need to declare it in France.

[ebaynut]

If you do not have to notify the tax department in France, I take it that there is no payments to make to any other department, i.e. social charges?

When you bring the money into France and place it in an interest earning account, of course, I take it that the interest earned would  be subject to French tax and social charges, the same as if it was earning interest in a UK account.

 

[cooperlola]

Somewhere, I have the difinite answer to this which my accountant sent me - if the op would like a copy, you should pm me.  However, in my case I declared it but it was judged exempt as I had been living here less than 5 years.  Interest on the amount however is, as said above, taxable, whether the money is left in the UK or transferred to a French account, as is all unearned income when you are domiciled here.

[pugwash]

As far as I know, UK inheritance  is always taxed in the UK therefore within the tax agreement between Euro countries you cannot be taxed twice. The capital then becomes taxable on it's earnings whether they are earned in UK France or Timbuctoo, as the French tax all French citizens (which you are for this purpose if you live full time in France) on Worldwide income.

[cooperlola]

It's here

http://impots.gouv.fr/portal/dgi/public/particuliers.impot

Mods - could you shorten this link for me pls!

All done!

[derf]

I have not read through it all, but is it not talking about if the deceased lived in France?[:)]

[cooperlola]

A very quick read seemed to me that it covers all the eventualities but like you I need to study it better.  However, it's a good place to start for anybody in this situation.  Ultimately, I think a notaire or good accountant should be consulted before anybody considers not including something on their french tax return.  It would be awful to be wrong and to be fined at a later date.

[pugwash]

Do you have to have a minimum qualifying number of posts before people acknowledge you have contributed ?

[Bugsy]

28 Pugwash, thats the magic number.

Only joking, all posters suffer from what seem to be invisibility at times, don't take too much notice of it..........[:D][:D]

[SC]

Thanks for the link, I'm interested in this too.

Vérifiez si le patrimoine du défunt est soumis ou exonéré de droits de succession.

Check if the estate of the deceased is subject to or exonerated from (French) succession tax.

Si le défunt n’avait pas son domicile fiscal en France et pour les décès intervenus à compter du 1^er janvier 1999, l’imposition dépend du domicile de celui qui reçoit les biens:

• le bénéficiaire est domicilié fiscalement en France au jour du décès et l’a été depuis au moins six ans dans les dix années précédant la date du décès, tous les biens meubles et immeubles français et étrangers reçus sont imposables en France
  

• le bénéficiaire est domicilié hors de France, seuls les biens situés en France sont imposables.

Briefly it says that if the deceased isn't tax resident in France, the imposition of taxes depends on the residency of the beneficiary.

If the beneficiary is tax resident in France at the moment of the death and has been for at least six of the previous ten years, then all French and foreign goods and property received will be taxed in France.

If the beneficiary is tax resident outside France, succession tax only applies to the French part of the estate.

I can't see anything in the rest of the document that suggests a normal UK estate would be excluded.

I think that's the gist of it, not word for word. It's bad news for a lot of (us) folks though. Transmission from parent to child benefits from a 50K allowance (and possibly a share of another global 50K allowance) after that taxes apply. A UK IHT free 300K GBP or 441K€ estate inherited by a French tax resident from their parent would attract roughly 76,500€ succession tax if my calculations are correct - any constructive comments gratefully received. Likewise recommendations for a good accountant, notaire.

Steve

[cooperlola]

Apologies, Pugwash.  I did see your post but rather thought that it was contradicted by the info' on the tax website and the info' I had got from my accountant when in these circumstances.  It's always a bit pot luck on here as to whether one's efforts are appreciated or not.  It has absolutely nothing to do with the number of posts you have made, believe me!!!  It is only related to the manners - or lack of them - of those in search of the info', and how much time they have to spend on fora, I guess.

My own understanding was that I was only taxed (or rather, not) on the inheritance in the UK because I had not been domiciled here for long enough.  Thanks for the translation, btw, Steve.

[cooperlola]

Just to clear up the source of my info etc, here is the pertinent paragraph from the article sent to me by my accountant :

"The main item of good news is that UK nationals (who are not also French nationals) who become resident in France will be exempt from French wealth tax in respect of real estate situated outside France for the first 5 years of their French residence.  It the UK national leaves France for a period of at least 3 years, a further 5-year exemption will start again from the date of his return to France."

 

From the article "New double tax treaty between France and the UK"  4.7.2005

I should add that in my particular case I was selling an inherited property - there was no additional cash sum involved or investments etc.

[pugwash]

Cooperlola,  don't worry , as for the inheritance tax, no,  it makes no difference, and don't confuse it with wealth tax, as I don't have any, it's not an area I know about, but doesn't wealth tax only apply if you move it to France surely you cannot be taxed just for having it ? You can definitely be taxed on it's income whether you bring to France or not.

[cooperlola]

As I say, I am no accountant.  Also, I'm far from wealthy too.  However, some inherited UK properties could be worth upwards of £250,000 these days and if you have been living in France for over 5 years, I am pretty sure from the evidence on the site and the article quoted above, that you'd be taxed here not in the UK.  However, if you do not sell the property then, I agree, this could change things.  You may only be taxed on any rental income, should you choose not to sell.  However, if you should sell the property, would it be seen as a capital gain?  These are the things I do not know as it is beyond my personal experience - I can only glean what Steve did from the French government tax website. I still think that when these sorts of sums could conceivably be involved, it is best to consult a professional because the penalties for getting this wrong could be horendous. 

Like you, I'm sure you can't be taxed for having money which was yours before you got here - only on income from its investment.

[LesLauriers]

Pugwash said "surely you cannot be taxed just for having it ?"

Yes, you are taxed for "just having it".

[suein56]

[quote user="cooperlola"]

"The main item of good news is that UK nationals (who are not also French nationals) who become resident in France will be exempt from French wealth tax in respect of real estate situated outside France for the first 5 years of their French residence.  It the UK national leaves France for a period of at least 3 years, a further 5-year exemption will start again from the date of his return to France." [/quote]

I know this statute [?] re the wealth tax changes for incomers to France is now law here in France but can anyone remember when it is actually going to come into force - I've got a feeling it is this year, but cannot remember where I saw the details.

Sue

[LesLauriers]

[quote user="cooperlola"]

As I say, I am no accountant.  Also, I'm far from wealthy too.  However, some inherited UK properties could be worth upwards of £250,000 these days and if you have been living in France for over 5 years, I am pretty sure from the evidence on the site and the article quoted above, that you'd be taxed here not in the UK.  However, if you do not sell the property then, I agree, this could change things.  You may only be taxed on any rental income, should you choose not to sell.  However, if you should sell the property, would it be seen as a capital gain?  These are the things I do not know as it is beyond my personal experience - I can only glean what Steve did from the French government tax website. I still think that when these sorts of sums could conceivably be involved, it is best to consult a professional because the penalties for getting this wrong could be horendous. 

Like you, I'm sure you can't be taxed for having money which was yours before you got here - only on income from its investment.

[/quote]

In the example you give:

French inheritance tax would be payable upon inheriting the house.

Rental income would be subject to UK tax and declared in France.

French capital gains would be charged on the gain in price between inheritance and sale.

Wealth tax would be applicable on 1st Jan following inheritance if your total worth was over 750k€

And yes you are subject to wealth tax for having money which was yours before you got here - subject to ISF rules.

[cooperlola]

Thank you Leslauriers.

[ebaynut]

The reason I asked this follow up question is because on page 78 of this months Living France, the correspondent states in his article (and I quote) "that under the UK/France inheritance tax treaty, inheritances (but not gifts), from a UK domiciled deceased to a French resident recipient are not liable to succession tax in France (except for French property), even where the recipent has been resident in France for more than six years".

Now the person who wrote this is a professional in this field, who charges for his knowledge, however not so long ago he also wrote an article containing information about a 'La Poste account', and had to admit his information had been incorrect in a later addition, so do we believe everything we read in magazines?

Not so long ago a feature on septic tanks stated that they had to be 30 metres deep, sure this was clearly incorrect to those of us who know, but to those who did not, confusing. This again was corrected in a later edition, but some readers may not have brought the next copy, leaving them with incorrect information, from a magazine that is purchased to obtain correct information.

Bear in mind, no information at all, is better than incorrect information.

The article also does not mention if social charges are payable, just that tax is not. I guess we will never get the full story from magazine articles, as if they told all, we would not have to pay for advice from professionals.

[TreizeVents]

So where could I find out what the rate is on various amounts for inheritance tax in France.  I may get some money soonish from an American relative, and wondered how to compare the rates of tax in the two countries.  But it sounds like as one who is domiciled here and pays tax here, I wil have to pay on the money at French rates.

[allanb]

I can't contribute anything new on the question whether tax is payable on inherited assets.  But just to clarify one point: the OP asked whether the amount, if any, would be taxable as unearned income.  I'm fairly sure that it wouldn't: there is a scale of rates (barème d'imposition) for succession tax which is different from income tax (and not connected with it in any way, as far as I can see).

TreizeVents: there is a France/US treaty on gift and inheritance taxes, which is probably where you would find the answer.  You can find the text here, among other places:

www.info-france-usa.org/intheus/tax/