Current issues

Wealth tax (the ISF) as well as simple international mobility have led many French people to settle abroad, mainly in Belgium, the United Kingdom and Switzerland, but also in Italy, Portugal and Morocco.

To mitigate the consequences of their departure on the public purse, at the end of 1999 the legislature modified the territoriality rules for transfer duties on gifts and inheritances so that heirs in France would have to pay them. Under Article 750 ter paragraph 3, beneficiaries who reside in France and receive or inherit property located abroad from a non-resident are subject to these duties.

Naturally this rule doesn’t apply if there is a tax treaty, but there are very few such treaties and even fewer with countries that do not tax gifts and inheritances or do not tax them very heavily. One example is Italy, with which France has a tax treaty on gifts and inheritances and which only taxes inheritances between lineal ascendants and descendants at 4%, with an exemption of €1 million, though this may change given Italy’s political instability.

And at one time France had a treaty applicable to inheritances with Switzerland, where many cantons do not tax inheritances between lineal ascendants and descendants, but France terminated it, trapping the many French residents of Switzerland as well as many Swiss residents of France.

However, if at least one heir resides outside France, family assets located outside France can be transferred to French resident heirs at a lower tax cost.

Bornhauser has already organised such transfers and has a network of foreign correspondents for this purpose.