An Irish father of Irish descent wants to donate a French property worth € 250,000 to his daughter, who also lives in Ireland. His will is subject to Irish law. Is there inheritance tax payable in Ireland or France (she receives nothing else)?
And if so, is it possible to make a donation while alive – he is 80 years old – and avoid such a tax?
Mr. HJ, email
Your request raises two questions which have always been very delicate: property in France and inheritance in France. The good news is, they’ve gotten a little less complicated in recent years. But you still need to make sure that you have all of the dotted and crossed legal niceties.
The issue of ownership is common to many countries – they retain taxing rights over property physically located in that jurisdiction. We will come back to this later.
The second problem concerns French inheritance laws and inheritance / gift tax structures. It can be a minefield and it is wise to make sure, in advance, that the measures you put in place will be acceptable under French law.
This will usually involve consulting a French notary – a lawyer who is also a public official appointed by the French Ministry of Justice to ensure that everything is done legally and registered correctly. It is advisable to speak to someone who is familiar with international heritage issues – not all of them – and preferably someone with whom you can converse in English. This may well involve consulting a larger practice. The Australian Embassy in France has a useful list on its website (https://france.embassy.gov.au/pari/lawyers.html)
There have been some major developments in inheritance management, both in France and more broadly in Europe over the past five years.
Traditionally, in France, you are circumscribed to whom you leave your property. In particular, children have special rights as “protected heirs” and cannot simply be disinherited.
However, as of 2015 new EU laws state that you can decide to have your will managed under the inheritance laws of your country of nationality – or any of them where you hold. multiple nationalities – not in the last country of residence or the country where the assets are located. This is the case even when the chosen country of nationality is a country outside the EU.
The important thing is that this preference is expressly stated in your will. This is not something that would be a standard clause in an Irish will, so you will need to make sure this is stated in the father’s will in this case, or change the will to make sure this is so.
Since he is 80 years old, this should clearly be done as soon as possible. The good news, of course, is that he made a will. You would be amazed at how many Irish people haven’t – even those in relatively late years.
The laws of the intestate will almost never reflect personal choices, and in the case of France, that would tie you into a very rigid succession structure that could thwart the father’s intention here if he has more than one child. .
From inheritance law to the thorny tax issue, French law will also interfere.
The father and daughter in this case are both Irish residents – regardless of their nationality, which is not clear – and the will is made in Ireland under Irish law. As a result, most inheritance tax matters would likely be dealt with under Irish capital acquisition tax law. And, with an exemption on the first € 335,000 inherited from a parent, there would be no Irish tax problem.
Most French property estates, but not all, will be taxed in France.
In general, double taxation treaties allow tax collected in one state to be credited against tax due in the other to ensure that people are not taxed twice for the same thing. However, a credit is only useful if there is a tax bill to credit it on.
In this case, French property is the only asset this girl gets under will. She is not liable for Irish inheritance tax as the benefit is less than € 335,000 – assuming she has not inherited – or received gifts – more than € 85,000 from her parents. As such, there is no tax invoice in Ireland to credit against taxes paid in France.
And she will have to pay taxes. Inheritance tax in France is a storm of rates and relationships. In the case of an inheriting child, they have a tax exemption limit of 100,000 €. With a property worth € 250,000, that leaves the girl in this case with a tax debt on € 150,000 in assets.
The inheritance tax ranges from 5% to 45%. In her case, she will pay most of it at 20 percent, with smaller amounts at 5, 10 and 15 percent. The total bill, I estimate, will be around € 28,000.
You mentioned the possibility of giving the property to the daughter while the father is still alive.
There are provisions in French tax law for gifts. Essentially, the boundaries appear to be the same as those for exempt inheritance tax exemptions – certainly between parent and child. The only difference is that you donate within the limit of this limit – 100,000 € – excluding tax every 15 years.
While it might be helpful for some people, I don’t see it affecting this situation. First of all, you’re talking about a property, so dicing and slicing is more tricky. More importantly, the father in this case is already well over 80: it is very unlikely, according to the law of averages, that he will survive 15 more years to offer an additional 100,000 €.
Regardless of the tax bill, there will be other requirements (and costs) for the girl.
As a first step, the beneficiaries or the next of kin are required to notify the French authorities of the death of a death resulting in inheritance.
Then, since it will be necessary to transfer the property to her name, she will be obliged to appoint a notary. These charge for a range of services, some on a flat rate basis and others as a percentage of assets. She might also be required to provide detailed details and documents, so this can all become a pretty cumbersome and expensive process – and there’s no getting around that.
Please send questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email at [email protected] This column is a reading service and is not intended to replace professional advice. No personal correspondence will be exchanged