Inheritance tax system
It seems obvious that inheritances are not exempt from taxation, which can sometimes be so heavy that heirs are obliged to resell assets in order to pay the taxes. If inheritances are, in principle, taxed on all the assets that made up the deceased’s patrimony on the day of death, there are ways to reduce the tax burden.
1- Stages to determine the net estate assets
The estate assets are assessed at their market value, which corresponds to the price that the normal play of supply and demand would allow the owner to obtain from the sale of a given asset, taking into account market data.
By way of derogation, the legislator has provided for assessment bases, in particular for buildings and furniture.
It should be noted that some assets are simply exempt from inheritance tax. This is the case for :
- The indemnities paid in case of a death insurance contract;
- Accretion clauses (tontine);
- Woods and forests;
- Rural property given under long-term leases and shares in agricultural forestry groups;
- “Natura 2000” sites;
- Works of art, books, collectibles or documents of high artistic or historical value donated to the State with its approval.
Therefore, any investment in these types of assets will lead to an exemption from inheritance tax.
The liabilities are then to be subtracted from the inheritance. To do so, the debt must exist on the day of death and be justified.
The duties are calculated on a net share. When the deceased has not made a will, the law designates their heirs and ranks them in order of priority. This is called legal devolution by order and degree.
2- Calculation and payment of Inheritance tax
There are three steps to the calculation of the inheritance tax:
- First of all, an allowance is applied to the net share of each taxpayer (which depends on the family relationship). There is an allowance of €100,000 for direct descendants, an allowance of €15,932 for siblings, an allowance of €7,967 for nephews and nieces, a specific allowance of €159,325 for disabled persons, and an allowance of €1,594 for those who have no other allowance.
- Then, the applicable duties must be calculated according to a rate which varies according to the relationship between the deceased and the beneficiary. There are three types of rates.
- Finally, if applicable, a reduction of duties is applied in favor of the war disabled. Disabled war veterans (at least 50% disabled) can benefit from a 50% reduction of the duties to be paid up to a limit of 305 €. Victims of terrorist attacks can benefit from a 100% reduction in duties.
It is to be noted that the Dutreil device is applicable for the transmission of a company in Inheritance. It leads to the application of a deduction of 75% on the value of the securities.
The declaration is filed on forms n° 2705-SD and 2705-S-SD. Notaries may file the declaration on computer. The declaration must be filed in duplicate, except when the gross assets exceed €15,000. The declaration must be filed within six months of the date of death.
As far as the payment of the duties is concerned, they are paid by the heirs or legatees. The co-heirs, with the exception of those exempt from inheritance tax, are jointly and severally liable for payment.
Inheritance tax is normally due by the usual methods of payment. In addition, when the amount of the duties is at least equal to 10 000 €, any heir or legatee can, subject to prior approval, pay the transfer duties free of charge by giving :
- Works of art, books, collectibles or documents of high artistic or historical value;
- Some premises located in the areas of intervention of the Conservatoire de l’espace littoral et des rivages lacustres;
- Woods and forests or natural areas that may be incorporated into the State’s forest estate.
Our lawyers are at your disposal to answer all your questions and advise you. Our meetings can be held in person or by videoconference. You can make an appointment directly online at www.agn-avocats.com.
AGN AVOCATS – Inheritance Department
09 72 34 24 72