French Inheritance Tax: Allowances, Calculation & Tax Planning Strategies
French inheritance tax (“droits de succession”) affects international heirs — particularly those inheriting property in France. An overview of tax-free allowances, how the tax is calculated, and strategies to reduce the tax burden in cross-border estates.
As a lawyer in French inheritance law, I advise on “droits de succession” — allowances, tax optimisation strategies and filing obligations.
Get in touch →1. French Inheritance Tax in Cross-Border Estates
Anyone inheriting assets in France, or holding property there, faces a complex tax situation. French inheritance tax (“droits de succession”) plays a central role in estate planning and the administration of French estates. It applies not only to French residents, but also to foreign nationals who inherit or bequeath assets — particularly real estate — located in France.
Advance estate planning is especially important when real property in France is involved, as French inheritance tax rates are higher than in many other countries. Nevertheless, there are effective strategies to reduce the tax burden — including lifetime gifts (“donations”) with a reserved right of use (“usufruit”), or the systematic use of tax-free allowances that renew every fifteen years.
Children’s Allowance
€100,000 per parent per child — renewable every 15 years.
Spouses & “PACS” Partners
Inheritance between spouses and registered partners (“PACS”) is fully exempt from French inheritance tax, regardless of the estate’s value.
Property in France
Even if both the deceased and the heir live abroad, a holiday home in France may still be subject to French inheritance tax.
2. When Does French Inheritance Tax Apply in a Cross-Border Estate?
French inheritance tax (“droits de succession”) applies whenever assets pass on death without consideration. The tax is triggered in any of the following situations:
- the deceased was resident in France at the time of death, or
- the heir was resident in France at the time of death, or
- the estate includes assets located in France — in particular real property.
Where the deceased was resident in France, the entire worldwide estate is subject to French inheritance tax, regardless of where the assets are located. Where neither the deceased nor the heir was resident in France, only assets physically situated in France are taxed.
Example: A British national domiciled in London leaves a holiday home in Brittany to his daughter, who also lives in the United Kingdom. Although both are resident outside France, the French property remains subject to French inheritance tax. In addition, the value of the property may be taken into account for UK inheritance tax purposes — though any French tax paid can generally be credited against the UK liability under the applicable tax treaty.
3. Who Is Liable to Pay French Inheritance Tax?
French inheritance tax is payable by the heir or legatee who acquires assets on the death of a French or foreign national. Because France operates a system of individual taxation on each heir’s share (“droits de mutation par décès”), the tax burden depends on the relationship between the deceased and each beneficiary, and on the value of the individual share received.
4. How Is the Taxable Value of the Estate Determined?
The taxable value of the estate is based on the open market value (“valeur vénale réelle”) of each asset at the date of death.
a. Valuation of Real Property
Property is valued at its open market value at the date of death, determined by reference to comparable sales or by an independent expert’s valuation. Where the property was the deceased’s principal residence (“résidence principale”), the assessed value is reduced by 20 per cent.
b. Valuation of Household Contents and Movable Property
The value of household contents (“mobilier”) is assessed on a flat-rate basis at 5% of the value of the remaining estate. Heirs may alternatively engage a qualified valuer (“commissaire de justice”) to demonstrate a lower value — a worthwhile exercise where the estate is substantial.
Example: An estate comprises a property valued at €500,000. Household contents are assessed at a flat rate of €25,000 (5% of €500,000). A specialist valuer may, however, establish a lower figure. Works of art, jewellery and antiques are valued separately.
c. Deductible Liabilities
Liabilities relating to the estate — such as mortgages, outstanding loans and funeral expenses — may be deducted from the gross estate value. The deductible items are, however, more restricted than in some other jurisdictions: legal fees cannot be deducted, and funeral costs are only allowable up to a flat-rate deduction of €1,500.
Example: An estate comprises a property valued at €600,000 encumbered by a mortgage of €50,000. After deducting the flat-rate funeral allowance of €1,500, the net taxable estate amounts to €548,500.
5. Tax-Free Allowances Under French Inheritance Tax
French inheritance tax allowances are considerably lower than those available in many other countries, and can only be renewed every 15 years (compared with 10 years in Germany, for instance). Inheritance between spouses and registered “PACS” partners is fully exempt — in contrast to the position in several other jurisdictions.
| Beneficiary | Tax-Free Allowance |
| Child / lineal descendant | €100,000 per parent |
| Spouse / “PACS” partner | Full exemption |
| Grandchild | €1,594 |
| Sibling | €15,932 |
| Nephew / niece | €7,967 |
| Other beneficiaries | €1,594 |
| Charitable organisations | Full exemption |
Illustrative comparison: A father domiciled in France leaves €400,000 to his son. In France: the allowance is €100,000; the taxable amount is €300,000; inheritance tax is approximately €58,194 (around 20%). The same inheritance would attract a very different tax burden depending on the applicable regime in the heir’s country of residence — underlining the importance of cross-border planning.
6. How Can French Inheritance Tax Be Reduced?
With careful and timely planning, the French inheritance tax burden can be significantly reduced. The main strategies available are:
- Phased lifetime gifts (“donations”): The €100,000 allowance per parent per child renews every 15 years. Starting early allows substantial wealth to be transferred free of tax over time.
- Gift with reserved right of use (“usufruit” / “nue-propriété”): Parents transfer bare ownership (“nue-propriété”) of property to their children while retaining the right to use and enjoy it (“usufruit”). Because gift tax is calculated only on the value of the “nue-propriété”, the tax charge is substantially reduced.
- French property holding company (“SCI”): Holding French real estate through a “société civile immobilière” can facilitate structured, tax-efficient succession planning.
- Tax treaty relief: Where a double taxation treaty exists between France and the heir’s country of residence, French inheritance tax paid can generally be credited against any liability arising in the other country, avoiding full double taxation.
Do you own property in France and wish to plan your estate in a tax-efficient way?
Get in touch →7. Double Taxation in Cross-Border Estates: The Franco-British Tax Treaty
In cross-border situations, the same assets may in principle be subject to inheritance tax in more than one country. This risk of double taxation arises wherever the deceased’s estate has connections with multiple jurisdictions — for instance where a French resident holds assets abroad, or where a non-resident owns property in France subject to tax both locally and in their country of residence.
To mitigate this risk, France has entered into a number of bilateral tax treaties specifically covering inheritance matters. The Franco-British Tax Treaty of 21 June 1963, which entered into force on 30 June 1964, applies to inheritance taxes. This treaty allocates taxing rights between France and the United Kingdom and provides for a tax credit mechanism to prevent full double taxation on the same assets.