Lifes Certainties are Death and Taxes

Napoleon sorted out a lot of things, many of which are the basis of French legislation today – possibly the most tenacious are the laws relating to property and inheritance. All children have an irrevocable right to inherit from their parents, this explains why flying over French farmland the millions of tiny irregular fields as the land had to be divided and sub-divided generation after generation.

France is also famous for stringent taxation laws – but luckily France also has a culture of resilience and confrontation so many options are available to share and divide property and wealth so a family can maintain its “patrimoine”.

If you are buying property in France it is very important to seek good advice relating to your own specific circumstances and wishes. In many cases this cannot be altered (without large expenses) after the purchase.

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Hi Tony,

Perhaps you can clarify a couple of questions I have.

1) Is inheritance tax based on the value of the property at the time of the deceased’s passing?

2) Is there any way to minimise or mitigate capital gains tax if the property is purchased with an SCI and is let as furnished? Initial shareholders will be an unmarried couple who reside in the EU.

Cheers,
Guy

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Hello Guy

Inheritance tax is assessed on the value of a property on the death of the owner or part owner. It is very important to carefully structure the ownership of the property and make use of allowable donations each year during the lifetime of the owner if you wish to reduce tax liabilities.

There is absolutely no way to avoid or minimise Capital Gains Tax on a property which would be liable – the best way of course to avoid this completely is for the property to be the principal residence – using a SCI and setting the shares correctly to children and any other shareholder you wish will reduce the value of that part you own, but on the sale of the property CGT will be calculated in the normal way. In your case it is 16 percent of the gain (the difference between the buying price plus costs an dthe selling price) for the first five full years thereafter reducing by 10 percent per annum until it is zero after the fifteenth full year of ownership.

There is a tax to pay on the transfer of shares and a share declaration must be made each year – it is important that the SCI is not a “trading” company and that it does not receive income from rentals etc or you will have other tax liabilities and expenses, but a good Notaire and a professional and insured accountant can best advise on this.

The question of marriage is not relevant – but all children of the owners (all children) would inherit that owners share of the property – it is possible to make an arrangement that the survivor has the full use of the property but it is impossible to take away the right of inheritance to any children. Recent laws have made it possible for children to renounce their inheritances.

This is my understanding but my advice is to discuss all these matters carefully and fully with a sympathetic and knowledgeable Notaire.

Where are you buying? I may be able to recommend a Notaire I respect.

Best wishes

Tony