Can I choose to have UK Inheritance Tax if I die in France?

based on an article for Connexion February 2021

Q

I am a UK / USA national with a UK / USA Will. I am currently living here in France but would I have to pay French inheritance tax on my worldwide estate if I was to die here? 

A

This is an excellent question, and one of the most easily confused aspects of cross border estates. 

For estates of a person who died after 15 August 2015, the EU Succession Regulation (EU 650/2012) allows people to use their Wills made after that date to make an express election of the law of their nationality to apply to how their estate is dealt with and who is allowed to inherit under that law.

If there is no express election of the law of nationality, then the law of the country of the last place of permanent habitual residence applies.

However,  taxation and law are not the same thing.   This is so commonly confused that I am going to put it three different ways:

1. You cannot elect which country taxes your estate.

2. Even if you elect the law of your nationality to apply to your estate, you cannot elect the tax rules of your nationality to be the relevant tax regime.

3. The EU Succession Regulation only applies to inheritance law, it does not apply to inheritance tax. 

If you die as a permanent resident of France French inheritance tax applies to your worldwide estate.  You may also face tax on assets in non French jurisdictions, and if there is a Double Tax Agreement in place between those countries, then you can generally credit the foreign tax against the French tax in relation to that same asset.

French inheritance tax isn’t always that bad though, but you do need to watch out:

If you leave the estate to a spouse or PACS partner or Registered Civil Partner, then there is no inheritance tax. 

A bloodline or adopted child gets a 100,000 Euro tax free allowance, and then tax applies on a sliding scale above that from 5% up to 45%. The 20% band however covers inheritance up to 552,324  Euros on top of the 100,000 allowance.

Under your national law, you may be able to leave assets to a step child or to an unmarried partner, but watch out, as they would be taxed at 60% save for a tax free allowance of 1,594 Euros.

You can elect your national law to apply to your estate, but you cannot elect which country taxes it (sorry – that was a fourth time just to reinforce it!)

John Kitching

Director

French Law Consultancy