How to optimize inheritance tax in France
As in many other countries, France has an inheritance tax (l’impôt sur les successions). It pay even non-residents. The amount may reach several tens of thousands of euros.
“As a rule, buyers are thinking about optimizing the tax if the purchase amount exceeds 500 thousand Euro. In the case of less expensive real estate, inheritance tax will not be significant”,— says Elena Chernysheva, sales Manager Tranio.com.
To avoid paying tax on inheritance may be only some of the family members. For all other workarounds are not provided, except for the rejection of the transferred assets. However, there are a few legitimate ways on how to make the heirs pay less.
Enlist family ties
Inheritance tax exempt property which passes from one spouse to another, and when the transfer of the inheritance to the partner associated with the deceased PACS (civil solidarity contract). All the other heirs are paid at a rate of from 5 to 60 %, depending on the value of the property and relationship.
This tax is also not paid any brothers or sisters of the deceased who constantly lived with him for five years before his death, was not married (been divorced or were widowers) and were older than 50 years or was incapable of work by reason of illness.
Some categories of heirs is based on tax credits.
Discounts inheritance tax
for different categories of heirs
| Category heirs |
The tax credit, Euro |
|---|---|
| Children, parents, grandparents, great-grandmother and grandparents |
100 000 |
| Grandchildren and great-grandchildren | 001 594 |
| Brothers and sisters | 015 932 |
| Nephews | 007 967 |
| Disabled | 159 325 |
| Other | 001 594 |
This means that the transfer of the inheritance, for example, from parents to children inheritance tax will not be subject to 100 thousand euros of the total value of the property.
To be in special circumstances
From the inheritance tax are exempt the heirs of the victims of wars and terrorist attacks, soldiers killed in military operations, fire, police, gendarmes, customs officials killed in the line of duty.
In addition, inheritance tax is not paid upon transfer of the property registered as a historical monument. Partially exempt from the tax those who receive the inheritance of agricultural land and forest land.
To separate the right of ownership
In French law there is the concept of “dismemberment” of ownership (démembrement de propriété): when, for example, the parent owns the usufruct (right to use property), as successor-son — nue propriété (real property without the right to use, or simply wall).
The “dismemberment” of ownership allows you to reduce the inheritance tax by 40-50 %. The tax is calculated only on the value of the shares of nue propriété. For example, if the father sends his heir to the estate without the right of use (that is, only the walls) at a cost of 260 thousand euros at the age of 59 years, the tax will be 4 EUR 194, 62 year — 9 394 euros. The sooner parents “dismember” the property, the less kids pay. After a parent dies, the heir receives the usufruct, restoring the full right of ownership and without paying additional tax.
To issue the property on SCI and take the credit
SCI — Civil company real estate (la société civile immobilière). When buying property on credit for the company significantly reduced the inheritance tax and gift tax.
You need to go through the following steps: to establish SCI, buy for this company real estate loans, “divide” property and send it as a gift to the heir. The donation amount of the mortgage is deducted from the value of the shares of SCI. Example: the father at the age of 59 years donated property at the loan balance of 50 thousand euros, while the share of property without the right of use (nue-propriété) is estimated at 105 million euros (50% of 210 thousand total cost). In this case, the tax amount will be only 250 Euro.
“Sale SCI — the most common method used to significantly reduce the inheritance tax. A civil company can form at least two persons, the maximum number of participants is not limited,”— says Elena Chernysheva.
To invest in life insurance
Life insurance (assurance-vie) enables you to pass without paying tax assets with a value up to 152.5 thousand euros, regardless of the degree of kinship. This method works in that case, if the insured paid contributions before reaching 70 years. If the amount of the beneficiary exceeding 902 838 euros (after discount), inheritance tax will be 25 % if the amount is less than 20 percent.
To transfer the property every 15 years
Tax credits are recorded every 15 years. That is, prudent parents can every 15 years to pass 100 thousand euros excluding tax (200 thousand, if passed by both parents, or 400 thousand euros if two parents transfer property to two children).
Yulia Kozhevnikova, Tranio.com
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