Aller au contenu

Inheritance tax, it is not good to die in France

This tax on inheritance which makes the French flee

Inheritance tax. In recent years, this tax has become a strategic issue for countries wishing to attract wealthy taxpayers from all over the world. So much so that a majority of them have opted either to abolish it or to abolish it altogether. Following the example of Portugal and Sweden, or for their reduction, following the example of the United States and Italy.

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

A few well-known taxpayers: Florent Pagny, Charles Aznavour, Johnny Hallyday; and above all a cohort of unknown taxpayers. They all have one thing in common. They left France, usually with their wives and children, for more or less overt tax reasons. One of the many advantages of living abroad is that they can 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 direct inheritance, i.e. between parents and children, is... 45 %, the highest in the European Union. By way of 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, in direct line behind 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 with 1 million euros in Italy and $11.2 million in the United States.

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

A tax that has recently increased

Inheritance tax, already high, has been progressively increased in recent years. In 2013, the marginal tax rate applicable to direct descendants was increased from 40 % to 45 %. In addition, the amount of the applicable allowance (tax-free amount). was reduced by more than a third in 2012, from 159,325 euros to 100,000 euros. Not to mention that the conditions for benefiting from this allowance have been significantly tightened. This is because the "rapport fiscal" period, i.e. the time limit applicable for an heir to benefit from the allowance at the time of inheritance, has been extended. This period, initially set at 6 years, was increased to 10 years in 2011... and then to 15 years in 2012.

Freezing the tax scale

Added to this is the freezing of the inheritance tax scale since 2012 (it was previously indexed to inflation, like the income tax scale). And the tightening of the split-payment system, which allows heirs to spread out their tax payments over time. The settlement period, which could, in certain circumstances. 10 years, was reduced in 2015 to just 3 years. However, this deadline is often difficult to meet, so much so that some heirs are forced to part with part of their inherited assets against their will.

Finally, the interest rate payable by heirs to benefit from this fractional payment was also modified in 2015 insofar as the very low or even zero legal rate (0 % in 2013 and 2014) was replaced by an interest rate indexed to fixed-rate home loans granted to individuals (2.2 % in 2015).

The result: inheritance tax receipts, and incidentally gift tax receipts, have soared in recent years; from around 7.7 billion euros in 2011, they rose to over 12 billion euros in 2016 according to Eurostat, representing an increase of 56 % in just 6 years!

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

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

As a result, in its latest report, the Conseil des prélèvements obligatoires (French council on compulsory levies) proposed reducing. Or even abolish the 100,000-euro allowance for children, as tax privileges for children are no longer really in vogue. It goes without saying that such an abolition would impact all French households, not just the wealthiest. So let's put French inheritances on alert...

Many countries have abolished this tax

Once again, France finds itself totally out of step with the rest of the world. Since the early 2000s. 15 of the 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 inheritance taxes 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 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 ahead of a destructive fiscal ideology. In Sweden, the 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 leading industrialists, chose to return there after several years of tax expatriation.

A trend for economic and moral reasons

There are both economic and moral reasons for this trend to abolish or at least abolish inheritance tax. There are both economic and moral reasons for this trend. From an economic point of view. Countries faced with increasingly intense tax competition know that they must reduce the taxation of capital, or risk losing their taxpayers. Secondly, from a moral point of view, inheritance tax has the pitfall of sacrificing the intergenerational and family conception of property, in favor of a purely mono-generational and individualistic conception; which amounts to limiting the scope of parental transmission to mainly immaterial elements such as education or moral values.

It goes without saying that the state's monopolization of inheritances. Not to the liking of all those who have worked all their lives hoping to bequeath the fruits of their labor to their children.


VAP Consulting

Our advisors are at your disposal

Hello and welcome to VAP Consulting. Our team is at your disposal to answer any questions you may have.

Powered by WpChatPlugins