Free transfers (“mutations à titre gratuity”) concern two categories: transfers by death (legal or testamentary successions) and inter vivos transfers (direct or indirect donations, shared donations (“donations-partage”) or manual donations).
Donations are subject to the same tax regime as successions pertaining to its taxable assets and rates.
For the taxation of free transfers, a taxable free transfer must exist in order to be payable.
At an international level, the transfer must concern assets that enter in the scope of French tax. The international element of the transfer can result from a residency abroad of the beneficiary, assets located abroad or the location abroad of an element of liabilities imposed on the transferred assets.
In order to determine if a free transfer possesses an international element that is taxable in France; it is necessary to take into consideration if the beneficiary (“donateur”) or the deceased is domiciled in France or abroad.
A donor or deceased domiciled in France upon opening of the succession:
Are considered as having their tax residency in France, the donors or deceased that have their home, place of main residence (of more than six months) or that carry out a professional activity or the center of their economical activities in France (Article 4 B of the French general tax code).
The place of the tax residency will be taken into consideration at the moment of the death for transfers by death or of the acceptance of the donation in the case of inter vivos donations.
Therefore, for the donor or the deceased domiciled in France, all his or her assets that are subject to free transfers are taxable in France, whether he or she is French or not.
An alleviation of this principle of general taxation is however provided for, when the tax for an asset located abroad has already been paid; it is imputed on the tax owed in France in order to avoid a potential double taxation. This imputation does not apply to donors or deceased that are not domiciled in France.
A donor or deceased not domiciled in France upon the opening of the succession:
For a donor or deceased not domiciled in France, only free transfer tax on assets located in France is taxable. Are considered as assets located in France, intangible assets for which the debtor is domiciled in France or its use is carried out in France.
The criteria for “French tax residency” also takes account of the residency of the heir, the donor or the legatee. When the last domicile is located in France during at least six months during the ten years preceding the transfer of assets, French tax is also applicable to transferred assets located abroad. The tax eventually paid abroad is imputable to the tax paid in France.
Maître Frédéric Michel – Fairfield Law firm | Lawyer in Cannes