French inheritance tax – what liabilities can be taken into account to calculate the net taxable estate?

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It is no secret that France has one of the highest levels of inheritance tax levied on death among all EU countries. As a result, beneficiaries, who are personally liable for their own inheritance tax, often seek to deduct as many liabilities as possible to reduce the net taxable amount on which the inheritance tax will be calculated. As can be expected, there are strict rules surrounding what is a deductible liability, and what is not.


The principle, set out in Article 768 of the French Tax Code, is that deductible debts can only be those which were due personally by the deceased, prior to the date of death, and not yet settled (NB: Debts that became due three months before the date of death will be deemed to have been settled by the deceased and non-deductible, unless a certificate from the creditor to the contrary can be obtained).

The principle is applied strictly. For example, the French Supreme Court ruled that indemnities due to the termination of employment contracts for a company owned by the deceased, terminated by the beneficiaries further to the death of their relative, were not deductible liabilities of the estate. The existence of the debt must also be certain, though this does not necessarily mean that the amount of the debt has to be known by the time the return is submitted. In such cases, for example where there is ongoing litigation as to a sum due by the deceased, the existence of the debt can be noted in the French inheritance tax return, and a claim for a refund of the inheritance tax paid should be made once the amount of the debt is determined. Also, accepted liabilities include costs which the deceased had agreed and was contractually bound to pay during their lifetime, but were only invoiced after the death. These might include, for example, where building work was being carried out on their property but had not completed, and the deceased had been invoiced in their lifetime.

While there is no requirement under French law to send supporting documentation to the tax authorities with the French inheritance tax return, the beneficiaries must be able to provide the relevant supporting documentation should a query arise.

Exceptions to the principle

There are a few exceptions to this principle which are set out in French law:

  • Funeral fees

While funeral fees cannot, of course, be considered a debt that arose during the deceased’s lifetime, French law does allow for them to be deducted as a liability of the estate. This is limited to a fixed amount of €1,500, regardless of the actual costs spent on the funeral fees. There is no need for any supporting documentation to be presented and the tax authorities will never query the amount. However, in a cross-border context, where the funeral fees have already been deducted as a liability of the estate in the UK, it can be questioned as to whether they can then also be deducted in France.

  • Notaire’s fees to open and register a French holographic Will

If the deceased left a French holographic Will (or a formal “gift between spouses” (donation entre époux) Deed), said Will/Deed must immediately on death be presented to the Notaire (or formally opened by the Notaire who held the original), who will then prepare the required Deed of opening and registration of the Will/Deed and charge a registration fee, of usually €125. It is also accepted practice to deduct as a liability the Notaire’s fees expended by the deceased for the drafting and registration of their Wills with the French Central Wills Registry during their lifetime. Considering the difference in level of fees between the preparation of holographic Will in France by a Notaire and an English style Will in the UK, and the fact that France does in general interpret exceptions to their rules quite strictly, it is unlikely that the French tax authorities would agree to extend that rule to fees incurred by the deceased for the preparation of an English Will or a French holographic Will drafted by a UK solicitor.

  • Spouse/partner’s temporary right to occupy the marital home

It is a principle in French law that, on death, the deceased’ spouse or civil partner has a statutory right to occupy the marital home for a year, at no cost to them. In cases where the marital home was rented, or owned “en indivision” with a non-occupier owner, this means that the estate must pay the rent/occupation indemnity for the duration of this statutory right. Any sums effectively paid by the estate can be deducted as a liability of the estate (but only as far as the rent/indemnity occupation is concerned, and other charges such as utilities or property taxes are not included).

Debts due to the beneficiaries

To avoid beneficiaries artificially reducing the amount of French inheritance tax they must pay by claiming that they are creditors of the deceased, the tax authorities will not accept as deductions, and deem as “non-existent”, any such debts unless they can be supported by the existence of an authentic Notarial Deed or properly drawn up and signed private contract. The simple fact of referring in a Will to a debt owed by a beneficiary is not sufficient to prove the existence of the debt and will be ignored by the French tax authorities.

As indicated by the above, the French law rules surrounding deduction of liabilities to calculate the French inheritance tax due by each beneficiary on an estate are very specific, and care must be taken in preparing the French inheritance tax return, especially if not dealt with by a Notaire, to avoid the dreaded “redressement” in the event of a query from the French tax authorities.

For more information and to seek assistance with regard to deductible liabilities in relation to French inheritance tax, please contact our team.