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Inheritance tax, it is not good to die in France

This tax on inheritance which makes the French flee

Inheritance tax. This tax has become a strategic issue for countries wishing to attract wealthy taxpayers from around the world. So much so that a majority of them have opted either for its abolition. Following the example of Portugal and Sweden, or for their decrease, as in the United States and Italy.

Nothing of the sort in our country, however! In the name of the "French tax exception", we have chosen to increase this tax rather than decrease it; even if it means mourning the successive departures of our wealthiest compatriots who go to live and die under less taxed skies...

Some known taxpayers: Florent Pagny, Charles Aznavour, Johnny Hallyday; and above all a cohort of unknown taxpayers. All have one thing in common. They have left France, usually with their wives and children, for more or less avowed tax reasons. Among the many advantages conferred abroad is the ability to avoid paying French inheritance tax, provided that their heirs also reside abroad.

One of the highest taxes in the world

In France, the marginal tax rate on inheritance in direct line, i.e. between parents and children, is... 45 %; which is the highest rate in the European Union. This is the highest rate in the European Union. By comparison, the rate is only 30 % in Germany, 15 % in Denmark and even 4 % in Italy. Moreover, it is the third highest rate in the world, directly after Japan (55 %) and South Korea (50 %).

Added to this exorbitant rate is the fact that France has one of the lowest inheritance tax allowances in the world: 100,000 euros compared to 1 million euros in Italy and now 11.2 million dollars in the United States.

And the taxation is even more confiscatory for the other heirs since they can be taxed up to 55 %. If they are part of the family and even up to 60 %, without any allowance, in the opposite case.

A tax that has recently increased

The already high inheritance tax has been gradually increased in recent years. The marginal tax rate applicable in direct line was thus increased in 2013 from 40 % to 45 %. In addition, the amount of the applicable deduction (tax-free amount). Has been reduced by more than a third in 2012, from 159,325 euros to 100,000 euros. Not to mention that the conditions to benefit from the latter have been significantly strengthened. Insofar as the period of "fiscal report", i.e. the period applicable for an heir to benefit from the allowance at the time of the succession. After having benefited from a previous donation, it has been more than doubled: initially set at 6 years, it has been increased to 10 years in 2011... then to 15 years in 2012.

Freezing the tax scale

In addition, the estate tax scale has been frozen since 2012 (it was previously indexed to inflation, like the income tax scale). And the tightening of the system of split payments, which allows heirs to spread the settlement of their taxes over time. The settlement period which could, under certain circumstances. The settlement period, which in certain circumstances could be spread over 10 years, has been reduced in 2015 to only 3 years. However, this period is often difficult to respect, so much so that some heirs are forced to part with part of their inherited property against their will.

Finally, the interest rate payable by heirs to benefit from this split payment was also changed in 2015 in that a rate of interest indexed to fixed-rate home loans to individuals (2.2 % in 2015) was substituted for the very low, or even zero, legal rate (0 % in 2013 and 2014).

The result of the race: the revenue from inheritance tax, and incidentally from donations, has soared in recent years; from about 7.7 billion euros in 2011, it rose to more than 12 billion euros in 2016 according to Eurostat, which represents an increase of 56 % in just 6 years!

And that could still increase in the next few years...

How to remedy the problem of confiscatory taxation of French inheritances? By taxing them a little (or a lot!) more. Of course! According to France Stratégie, the OFCE and more recently the Conseil des prélèvements obligatoires, the French inheritance tax, even though it is already one of the highest in the world, is still not high enough to meet the objective that some have assigned to it, namely "to curb the share of inheritance in the constitution of household wealth". Another very French fight!

As a result, the Conseil des prélèvements obligatoires proposed in its latest report to reduce or even eliminate the 100,000 euro deduction for children. 100,000 deduction for children, as it is no longer in fashion to give them tax advantages. It goes without saying that such an abolition would impact all French households and not only the wealthiest. So, alert for French inheritances...

Many countries have abolished this tax

Once again, France is totally at odds with the rest of the world. Since the beginning of the 2000s. 15 out of 35 OECD countries have abolished inheritance taxes, including Portugal (2004), Sweden (2005), Russia (2005), Austria (2008), the Czech Republic (2014) and Norway (2014). Italy also abolished them in 2001 before reintroducing them in 2006 at a very low rate.

As can be seen, it is not the countries that tax or redistribute the least that have abolished the inheritance tax. The level of tax pressure and public spending in Sweden and Austria. Being relatively close to those of France. This illustrates the fact that some protective countries have been able to put their economic prosperity before a destructive fiscal ideology. In Sweden, a welfare state par excellence, it was the social democrats who abolished inheritance tax, which had a beneficial impact since the famous founder of IKEA, Ingvar Kamprad, and other major industrialists chose to return there after several years of tax expatriation.

A trend explained by economic and moral reasons

This trend to abolish or at least. This trend to abolish or at least abolish inheritance tax has both economic and moral reasons. From an economic point of view. Countries facing increasing tax competition know that they have to reduce the taxation of capital, otherwise their taxpayers will leave. Secondly, from a moral point of view, the inheritance tax has the disadvantage of sacrificing the intergenerational and family conception of property in favour of a purely mono-generational and individualistic conception; this amounts to limiting the scope of parental transmission to mainly immaterial elements such as education or moral values.

It goes without saying that the monopolization of inheritances by the state. This is not to the liking of all those who have worked all their lives hoping to bequeath the fruits of their labor to their children.


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