International Inheritance: The Pitfall of Double Taxation

While France has not negotiated any inheritance treaties for several years, cross-border transfers are increasingly exposing families to double taxation. Article 784 A of the General Tax Code (CGI) partially mitigates the impact, but the tax burden remains heavy, as illustrated by the case of the canton of Vaud in Switzerland.

The End of Tax Treaties: A Deliberate Choice with Serious Consequences
Inheritance matters were long governed by bilateral tax treaties, which prevented two countries from taxing the same estate. But France has gradually phased out these treaties. The most emblematic example is the Franco-Swiss treaty, which France terminated in late 2014 and which covered, in particular, the border cantons.
 

As a result, today, when a decedent or an heir has ties to multiple countries, there is a high risk of double taxation. Under Article 750 ter of the General Tax Code (CGI), France taxes:
• all assets if the heir has been domiciled in France for at least 6 of the past 10 years,
• assets located in France if the heir is not a French resident.
 

At the same time, the foreign country may tax assets located within its territory. In the absence of a treaty, France applies Article 784 A of the General Tax Code (CGI), which allows foreign tax to be credited only against assets located abroad. In short: a French heir pays inheritance tax in France on their entire estate and then credits the foreign tax solely against the foreign assets. However, if the foreign country also taxes the French assets, no tax credit is available. The risk of a “tax black hole” is very real.

Case study: a Franco-Swiss estate in the canton of Vaud
The example of the canton of Vaud is telling. This canton applies a direct-line exemption of 1 million Swiss francs per heir, followed by a 3.5% rate on the excess. In comparison, France taxes direct heirs at a progressive rate of up to 45%, after an exemption of only 100,000 euros per child.
 

In practical terms, a French heir who receives 2 million Swiss francs from a relative residing in Vaud will have to:
• pay approximately 35,000 CHF in Switzerland,
• then declare the estate in France and pay taxes that may exceed 600,000 euros,
• with a limited offset: they will only be able to deduct the 35,000 CHF corresponding to the foreign asset, not the remainder.
 

The difference is enormous: the French tax system absorbs the bulk of the estate, even if the decedent has already paid taxes abroad. This case illustrates the lack of coordination and the growing burden of cross-border estate taxes.

Planning Ahead, Structuring, and Localizing Assets
Faced with this reality, practitioners continue to warn that planning ahead is the only defense. This can be achieved through:
• locating financial or real estate assets in the heirs’ jurisdiction of residence,
• structuring assets using tools such as life insurance, which can provide tax neutrality in the event of death,
• or making advance gifts before the heirs become French residents.
 

The heirs’ choice of tax residence is also a critical factor. Six years of residency in France are sufficient to trigger worldwide taxation. For international families, these rules require a comprehensive approach: where to hold assets, where to locate the heirs, and what timeline to follow for the transfer of assets.
 

By refusing to renegotiate inheritance agreements, France has made a deliberate sovereign choice. But for the families affected, this choice results in a massive increase in their tax burden and situations of double taxation that are difficult to justify. The Swiss case is just one example among many: the same difficulties arise with Canada, the United States, and certain European countries.
 

Sources: CGI, Articles 750 ter and 784 A; the 1953 Franco-Swiss Agreement, terminated in 2014; the tax system of the Canton of Vaud. Analysis by Banque Richelieu.