Inheritance Tax

[Bikboks]

I may benefit under a relative's will. This would be paid in sterling in the UK. I am a non-resident of the UK for tax purposes.

Would I be liable for tax on this windfall in France? If so what is the current order of pecentage?

Thank you in anticipation.

[cooperlola]

I inherited some money from my sister not long after I moved here. At the time, I was told (by my French accountant) that I was not liable to pay tax in France if I had been living here for less than 5 years.  But these things can change so I don't know what the current situation is, I'm afraid.

[parsnips]

[quote user="Bikboks"]

I may benefit under a relative's will. This would be paid in sterling in the UK. I am a non-resident of the UK for tax purposes.

Would I be liable for tax on this windfall in France? If so what is the current order of pecentage?

Thank you in anticipation.

[/quote]

Hi,

    If you have been resident for less than 6 of the previous 10 years, you are not liable.  If you have been resident for more than that, then you are liable under a law brought in on 01/01/1999. The tax due would depend on the closeness of the relationship-eg. from a parent 151950€ (equivalent) would be tax-free, then liable mainly at 20%--for a sibling(apart from some exceptional allowances) up to 23299€ @ 35%,above that @45%. The uk-france double taxation (inheritance) treaty gives allowance against french tax for any UK IHT paid.

    Before the "Holier- than-Thou" brigade start preaching about how we should all "pay our dues"etc. may I point out that this law was specifically brought in to catch potential french heirs of very rich french families, who were moving to low-tax jurisdictions before the "sad event", and so avoiding the enormous french inheritance tax bill. That is why the law specifies 6 of the previous 10 years. Because the successions of such people have to be declared in france, the french taxman can get his claws on the money to prevent it being sent to the "ex-pat" french heir. French-resident British heirs to UK based estates are caught almost "accidentally" by this typically ill-thought-out and loosely framed french "on-the-hoof" legislation.   

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[chessie]

The Tax Law Bikboks is writing about applies to French citizens and French citizens only. Doesn't matter where you live, most of us remain citizens of the country of our birth, unless we deliberately take another nationality/domicile. But for UK citizens living out here in France the rules regarding an inheritance from someone who has NOTHING to do with France is totally different.

Let's assume you are a UK citizen, living in France, and paying taxes here

You receive a sum of money as an inheritance from a relative, who is UK based, property and savings in the UK, has never visited France, never had anything at all to do with France - why should that relative's estate have to pay French tax ? What a b----y nonsense.

You will NOT pay tax on any inheritance from the UK. Firstly, if the estate of the deceased is over -(Oh Lordy whatever the new limit is) - then Tax will have been paid in the UK and the French, under Double Taxation CANNOT touch it - it's been taxed once, so push off French tax bod.

Secondly - and this is the very, very clever, bit - the UK tax authorities DO tax any estate under (whatever the new figure is) - but it is TAXED at ZERO percent - but it is 'TAXED' - so No, No, No, No, No, - don't get so paranoid about paying tax twice on whatever sum of money you might be fortunate to inherit.

Best of luck, and enjoy your good fortune...

Chessie

[parsnips]

Hi,

   While I agree wholeheartedly with chessie's sentiments, and wish it was as he says ,I suggest you look at http://www.french-property.com/guides/france/finance-taxation/inheritance/taxes

[Pickles]

[quote user="parsnips"]While I agree wholeheartedly with chessie's sentiments, and wish it was as he says ,I suggest you look at http://www.french-property.com/guides/france/finance-taxation/inheritance/taxes[/quote]

Hmmmm... if you read the link, then there is a bit that says "this liability is reduced by the extent to which there is a double

taxation treaty in operation between France and the country of

domicile, as is the case with the UK". If you look at the relevant Inheritance Double Taxation Convention, http://www.ambafrance-uk.org/Treaty-Inheritance-tax.html of which the operative version is still that from 1963 (the main, more recently modified Double Taxation Agreement refers to income and capital gains only), then it would seem to suggest that an inheritance from the UK will not be subject to further taxation if received in France.

Regards

Pickles

[Will]

This is rather a grey area because of the different ways that the concepts of residence and domicile are defined in Britain and France. As long as you are a UK citizen who still retains some ties with UK, e.g. property there, family there, bank accounts or investments there, or similar, you will probably be able to claim UK domicile and should not have to pay French inheritance tax on such an inheritance. If you are one of those who has severed ties, and been away for several years, you may be on difficult ground. Note that different rules apply to immovable assets (buildings, land etc). It's always best to consult a professional rather than rely on forum users' interpretations.

[parsnips]

It is very important when considering inheritance matters to distinguish between provisions affecting Inheritance law, and Inheritance Tax law.

As  Will says, immovable assets(real estate) are treated differently in Inheritance law , in that such assets in the UK always pass according to UK law,ie; they can be left to anyone as, even if the owner is french resident ,french rules imposing obligatory parts for reserved heirs do not apply.Liquid assets of a french resident pass under french Inheritance law.

   However, if the testator or the beneficiary are french resident(the french do not have a separate status of "domicile") -and under the new 1999 law you are french resident for succession purposes if you have spent 6 of the previous 10 years tax resident  in France-then french succession tax rules apply to any UK inheritance ,including real estate, allowance being given in France for Inheritance tax (if any--and it's quite rare now)paid in the UK.

   This is of course all very theoretical in the french manner, because whereas the french resident's financial affairs, including his succession,   are an open book to the french taxman, this is not so for UK residents, so in the OP's case he would have to voluntarily disclose an inheritance from the UK , which is asking rather a lot, in my opinion, particularly as I think this law was never intended to catch such an inheritance. Failure to disclose such an inheritance, could not in my opinion, be regarded as fraud, as no sane person would suppose that such an inheritance should be taxable in France.

   As Will also says , if  the OP does fit the legal definition of residence he may wish to consult a qualified person, as the best you can expect on a forum are (more or less informed) opinions, many of which are coloured by poster's personal experience of particular cases which may not be typical.

[Gastines]

Having had a substantial sum inherited from UK last year,we visited the local Impots just to put our minds at rest. Didn't want to know about it at all.

Been here as resident Taxpayers for 6 yrs+

Regards.

[parsnips]

[quote user="Gastines"]

Having had a substantial sum inherited from UK last year,we visited the local Impots just to put our minds at rest. Didn't want to know about it at all.

Been here as resident Taxpayers for 6 yrs+

Regards.

[/quote]

Excellent! Someone with actual experience in this matter. I would say though ,better to base one's actions on this testimony, rather than go to the tax office oneself to ask--french tax offices are notorious for taking divergent views on non-routine matters.

[Bikboks]

I would like to thank all of you who kindly took the time and trouble to answer my request for help. The distillation of all of this is that I feel quite reassured. Since the inheritance will most likely be taxed at source in the UK, with the executors statement showing this, I am confident I will not be liable  in France as well, or at least, I will have a valid reason for not declaring it if questioned.