Cross-border inheritances and gifts have traditionally raised complex civil and tax issues which, beyond the perplexity and legal uncertainty into which they plunge those concerned, all too often expose them to situations of double taxation that are, understandably, poorly received.

While double taxation is well known in the area of income taxation, insofar as that subject is more directly linked to the fluidity of the internal market, it nevertheless arises differently in inheritance matters.

In the former area, there is, on the one hand, a comparable method and comparable taxation criteria, fairly widely shared across Europe and, on the other hand, a vast network of tax treaties and a fairly well-developed practice in applying them.

This is not the case for inheritance tax, because the tax rules governing international inheritances are barely harmonised at all and vary from one State to another.

First of all, not all Member States levy such a tax. Of the 27 EU Member States, only 18 levy a specific inheritance tax, while the other 9 do not (such as Austria or Portugal), although in some of them death gives rise to income tax or capital gains tax.

Among the States that levy a specific inheritance tax, a further distinction is drawn between those that tax the beneficiaries on the basis of their enrichment (“inheritance tax”) and those that tax the deceased (de cujus) or the estate itself when a transfer of value is identified (“estate tax”).

Some States, such as the United Kingdom, muddy the waters by calling a tax “inheritance tax” when it is clearly an estate tax. The difference between these two methods of taxation reflects the difference that exists, from a civil law perspective, between systems of succession to property and systems of succession to persons.

In addition to these semantic differences, which have consequences for identifying the taxpayer and the taxable event, the various inheritance taxes also differ in their scope, their tax base, their rates and the applicable exemptions, which vary considerably from one country to another.

To be convinced of this, one need only take the example of the United Kingdom, where inheritance tax is payable by the deceased (or the estate itself) at the time of death (or upon the settlement of a trust), on a worldwide basis if the deceased was “domiciled” in the United Kingdom (since 6 April 2025: if the deceased was a “long-term resident” there, i.e. a UK tax resident for at least 10 of the previous 20 years), at a flat rate of 40% after deduction of £325,000 (an allowance applicable to all transfers).

In France, by contrast, the tax is levied on the beneficiary and is due on all of the assets transferred where the deceased or the beneficiary had their last tax residence in France. It is calculated at a progressive rate that varies according to the family relationship between the deceased and the beneficiary (the allowances also varying according to the family relationship, the highest, €100,000, being reserved for direct-line relatives). In the absence of a tax treaty between the two countries, a person could therefore be considered a tax resident of France but “domiciled” in the United Kingdom, their estate then being taxable by both States under very different rules, which will often prevent the application of domestic measures for the elimination of double taxation.

Among these differences in taxation rules, it is those relating to the determination of the territorial scope of the tax that, where they give rise to a conflict of taxing jurisdiction, are likely to generate double taxation, whether juridical or economic.

In all Member States that levy such a tax, the territorial scope of inheritance tax is determined on the basis of two alternative connecting factors:

– a personal connecting factor (residence, nationality, etc.) giving rise to unlimited tax liability;

– a real (property-based) connecting factor giving rise to taxation limited to the assets located (or deemed to be located) in the territory of the State concerned, or only some of those assets. Thus, Belgium levies tax on the estate of a non-resident only in respect of the immovable property located there. France, on the contrary, covers all assets located or deemed to be located in France under the rules of Article 750 ter, 2° of the French General Tax Code (Code général des impôts, CGI) (including shares in certain foreign companies holding real estate in France). Conversely, the Netherlands does not tax assets solely on the basis of their location.

This combination of connecting factors frequently leads to “residence vs. source” conflicts, with the State of residence (or nationality) of the deceased taxing the estate on a worldwide basis while another State also seeks to tax certain assets because they are located in its territory. This type of conflict is relatively standard and easy to grasp. The resulting double taxation generally falls within the scope of the unilateral tax credits granted by the State of residence.

Certain more complex types of conflict are in fact the consequence of the fact that connecting criteria vary from one country to another.

A first example is the conflict of personal connection. Although the majority of States rely on the notion of tax residence, this criterion is not unanimously shared by Member States (some States use the domicile criterion, others that of nationality or habitual residence).

Above all, the definitions adopted vary considerably from one country to another, the most striking example being that of the United Kingdom, whose concept of “domicile” is quite particular in that it includes an intentional element and does not depend solely on physical presence in the territory. Consequently, the deceased may be considered to be personally connected to two different States, thereby resulting in double taxation of the entire estate. Moreover, while most Member States apply these criteria only to the deceased, others apply them to the beneficiary or to both (this is the case in France under Article 750 ter, 3° of the CGI), which considerably increases the risks of double taxation.

There may also be a conflict as to the location of assets (conflict of real connection). This problem arises mainly for intangible assets. A bank account will, for example, be located in the State of the branch where it is held, or in the State of the bank’s registered office. Likewise, patents may be located at the place of exploitation or at the place of registration.

Finally, double taxation may result from a conflict of characterisation, which arises in particular in the case of shares in real estate companies, which may be treated for what they are (company shares) or for what they contain (real estate). This question is of particular interest in light of the French rules that allow shares in real estate companies to be treated as if they were a portion of the underlying property (Article 750 ter, 2° of the CGI), resulting in the shares of certain foreign companies being taxed as French assets.

However, cross-border inheritances may present additional difficulties, owing in particular to the existence of anti-abuse rules. One of the most common is the tax recall of prior gifts, under which gifts made in anticipation of the inheritance are taken into account in calculating inheritance tax, within the limit of a certain period. Some legislations also contain presumptions of residence or domicile with respect to their nationals who are no longer physically connected to the State in question (thus the Netherlands provides that a Dutch citizen is deemed to retain residence in the Netherlands for 10 years despite having left).

The difficulties raised by indirect transfers are particularly delicate. Yet such indirect gratuitous transfers are increasingly frequent, notably owing to the revival of fiduciary mechanisms in civil law countries (successive and residual gifts, fiduciary contracts, life insurance, private foundations, trusts). The time lag between the settlor’s divestment and the actual receipt of the assets by the ultimate beneficiary means that a temporal element must be incorporated into the connecting rule, consisting in determining whether the tax will be due (or residence assessed) at the time of the initial transfer or the final transfer.

This temporal element raises issues which, in private international law, are referred to as “mobile conflicts” (conflits mobiles) and which, in international taxation, may lead, depending on the case, to double taxation or double exemption. Take the example of an irrevocable trust settled by a person connected for tax purposes to a State that taxes this transfer as soon as the initial transfer occurs (such as the United Kingdom or Switzerland).

If that person or one of the beneficiaries subsequently settles in a State which, like France, considers that inheritance tax is due upon the death of the settlor or upon the transfer of the assets to the ultimate beneficiary, the transfer will also be taxed in that State. The reverse situation may also arise and result in double exemption.

Another complicating factor may arise from triangular tax situations, thereby multiplying the risks of tax conflicts, as in the case where the deceased is personally connected to one State, the beneficiary is connected to another State that taxes assets on the basis of the beneficiary’s residence, and real estate is located in a third State.

In light of this list, it is apparent that cases of double taxation may be numerous and have multiple causes, and that, as things currently stand, only States can provide a solution, whether unilateral or coordinated.

Furthermore, dealing with double taxation arising from a “residence-residence” conflict requires distinct rules. It should first be noted that the draft refers to domestic law for the definition of the terms “resident”, “domicile”, “national”, “habitual residence” and “permanent residence”. The Recommendation therefore does not make it possible to avoid residence conflicts, but merely to eliminate the resulting double taxation.

The latter may arise from two situations: either the deceased is connected to two different States by reason of their domestic connecting rules, or the deceased is connected to one State and the beneficiary to another.

In order to deal with the second scenario (residence of the deceased v. residence of the beneficiary), Article 4 provides that the State to which the deceased is connected takes priority over the State to which the beneficiary is connected. The latter must therefore refrain from taxing or grant a tax credit in order to eliminate the double taxation. This provision is particularly interesting in light of the French rules that allow the entire estate to be taxed where the beneficiary has had their tax residence in France for at least six years. This rule is the source of numerous instances of double taxation that Article 784 A of the CGI (offsetting of tax paid abroad against tax on assets located outside France only) does not make it possible to eliminate.

In the first scenario (conflict of residences of the deceased), Article 4.4 provides that the conflict will be resolved by a mutual agreement procedure in order to designate the State with which the deceased had the closest personal connection.

Under this procedure, the preferred State “may” be determined according to the following criteria:

– permanent residence,

– failing that, the centre of vital interests,

– failing that, habitual residence,

– failing that, nationality.

This mechanism is largely inspired by the residence clauses found in international tax treaties.

Moreover, from one treaty to another, the mechanism may be slightly or very different.

A careful review of each specific situation is therefore necessary.

Tax issues generally associated with international gifts

Beyond the traditional context of abuse of law (abus de droit), one must be vigilant regarding several issues that may arise along the path of an international gift.

In particular, we must pay attention to donees who have received a manual gift (don manuel) that was not taxable in France and who subsequently return there.

Under domestic law, two provisions aim to combat this possibility of tax evasion:

– Article 757 of the CGI, which subjects certain manual gifts to gift and inheritance tax (droits de mutation à titre gratuit);

– Article 784 of the CGI, which requires the recall of prior gifts, thereby establishing a taxable event for those gifts that were not subject to gift and inheritance tax.

Place where the deed is executed

The place where the deed of gift is executed is not a criterion determining the territorial scope of gift tax.

Thus, a gift executed before a French notary is subject to French gift tax only if the conditions of Article 750 ter of the CGI are met or if a tax treaty grants France the right to tax.

However, a deed of gift executed in France may be of strategic interest, particularly where registration is not contemplated in the donor’s country (for example: manual gifts in Belgium or England).

It may also be of interest if the donor’s estate may, where applicable, be taxed in France.

In that case, the tax recall provided for by Article 784 of the CGI requires a demonstration that the previous gift was not taxable.

Proof may be provided by means of the registration of the deed of gift previously executed in France.

If a gift is executed abroad, it may be taxable in France where the conditions of Article 750 ter of the CGI are met or if the applicable tax treaty grants France the right to tax.

Deeds of gift relating to assets taxable in France must be submitted for registration in France.

The deed in question will not necessarily be a notarial deed. Whatever the nature of the instrument, the deed must be submitted for registration:

– at the tax office for the donor’s domicile if the donor is domiciled in France;

– at the non-residents’ tax office where the donor is domiciled outside France.

In the event of late submission of the foreign deed to the registration department, late-payment interest will be due under the ordinary rules of French domestic law.

Manual gifts in international transfers (CGI, Art. 757)

Under Article 757 of the CGI, manual gifts are subject to gift tax:

– where they are recorded in a deed subject to registration containing their declaration by the donee or the donee’s representatives;

– where they are the subject of judicial recognition;

– where the person who benefited from the gift informs the tax authorities (administration fiscale) of it

Under Article 635 A of the CGI, manual gifts must be declared or registered by the donee or the donee’s representatives within one month of the date on which the donee disclosed the gift to the tax authorities.

Manual gifts that are disclosed and that are taxable in France must be registered using form no. 2735:

– at the tax office for the donee’s domicile if the donee is domiciled in France;

– at the non-residents’ tax office otherwise.

The taxable event for gift tax is, in principle, the date on which the donee discloses the manual gift. It is therefore not the gift that may have been made previously.

Case law and the Administration’s doctrine take the same position, namely that the applicable legislation is that in force on the date on which the donee discloses the manual gift to the Administration.

It might therefore, in principle, seem advisable to disclose to the French authorities manual gifts made abroad, even if they are not taxable in France.

This will be the safest means of limiting the tax pitfalls that the donee might face in the absence of such formalisation. An inpatriate who had previously carried out their wealth transfer by way of international gifts would, in principle, be better protected in this respect.

Gifts made abroad without a deed

Gifts made abroad, and not recorded in a deed, relating to real estate, businesses (fonds de commerce), clienteles or offices, and to a leasehold right or the benefit of a promise to lease real property must be declared within one month of taking possession, where they are taxable in France.

Gifts made abroad relating to other assets are subject to registration and to gift and inheritance tax only if they are recorded in a deed constituting the complete title to the gift. However, it frequently happens that such gifts are not recorded in a proper written instrument.

Tax recall in international transfers (CGI, Art. 784)

The civil law hotchpot (rapport civil) must not be confused with the tax recall (rappel fiscal) of prior gifts.

The tax recall of gifts has a direct impact on the calculation of gift and inheritance tax.

The recall period for prior gifts is 15 years.

In the case of prior gifts, the value of the assets that were the subject of those gifts must be added to the value of the assets included in the new gift or in the estate return, except for gifts made more than 15 years earlier.

Only gifts made less than 15 years earlier must be added back for the calculation of the tax pursuant to Article 784 of the CGI.

With regard to gifts made less than 15 years earlier, the tax recall has the following consequences:

– the allowances are applied after deduction of those from which the persons concerned benefited on the gifts made to them by the deceased less than 15 years earlier;

– where a progressive scale applies, the assets whose transfer has not yet been subject to gift and inheritance tax are deemed to be included in the highest brackets of the taxable assets;

– reductions in tax are granted after deduction of those from which the gifts made by the deceased less than 15 years earlier benefited.

Gifts made more than 15 years earlier are not subject to the tax recall. In that case, the heir, legatee or donee may use the full allowances, the lowest brackets of the progressive scale and the maximum tax reductions.

The tax recall is a fourth case of taxation of manual gifts (CGI, Art. 757), as it applies to all gifts, whatever their form.

Must a foreign manual gift that was not taxable be recalled for tax purposes within the meaning of Article 784 of the CGI?

The answer is given expressly by Article 784 of the CGI, which provides that all gifts, whatever their form, are subject to the tax recall.

What about gifts made by notarial deed (acte authentique)?

Legal commentators and practitioners are divided on this question.

Some simply consider that a registered foreign manual gift or a gift received by notarial deed before a foreign notary is not subject to recall in the context of a gift or an inheritance taking place in France.

It would also be possible to consider that a gift registered abroad starts the 15-year tax recall period running.

The question is therefore whether a gift registered abroad starts the 15-year tax recall period running, or whether a gift registered in France is absolutely required for the period to start running.

In practical terms, it might in some cases seem advisable to register in France the deed executed abroad.

That gift would then, where applicable, be subject to the tax recall under Article 784 of the CGI, which should be neutral if the gift was taxed abroad and fell outside the scope of French gift tax.

Our tax law firm can assist you.