French inheritance tax on Swiss properties
Heirs domiciled in Switzerland of a deceased person who died in France must also pay French inheritance tax on buildings located in Switzerland. The charge can be significantly reduced if the deceased held the assets during his lifetime in a particular form of company, known as the “Pacte Dutreil”.
If the Gallic rooster crows… and calls for taxation, this unwanted call can also reach Switzerland. This can happen, among other things, in case of inheritance.
France subjects worldwide succession to inheritance tax if (i) the deceased had his last residence in France or (ii) the heir has his residence in France.
On December 31, 2014, France denounced the former double taxation agreement (CDI) with Switzerland of December 31, 1953 aimed at avoiding double taxation in matters of inheritance tax. As a result, real estate located in Switzerland is also subject to French inheritance tax.
For example, if the owner of a Swiss property having his last residence in France dies and bequeaths the property to an heir domiciled in Switzerland, the Swiss heir becomes liable for inheritance tax in France. In this case, Switzerland also has the right to register the transfer of the property with inheritance tax, unless the heir is exempt from inheritance tax due to his connection with relatives in the corresponding canton in which the well is located. However, under French tax law, Swiss tax on the acquisition of the property is fully offset against French inheritance tax, so that under unilateral French tax law, double taxation is ultimately avoided. However, this Swiss tax must be claimed in France no later than the end of the second year following the year of the declaration of inheritance tax. However, there is no longer any real estate tax exemption, as in the old CDI with France.
The tax rates are progressive and amount to up to 45% for direct descendants and up to 60% for non-parents.
French tax law recognizes a particular form of reduction of inheritance tax by means of a “Pacte Dutreil”. In this case, the asset is used commercially based on a partnership agreement. The partners undertake not to sell their shares for a certain period of time. If the conditions of a Dutreil Pact are met, three quarters of the shares transferred are exempt from inheritance tax.