Will my daughter have to pay tax on inherited property in France?

Reader Question: I have had a property in France for 22 years. It is a second home and has been valued recently at €1,000,000. I have made a will which leaves it to my daughter, who is a French resident and lives nearby. When she inherits, what tax liability will she have? Will she be liable for capital gains tax on the house?

Once the property is inherited by your daughter, the capital gains tax (CGT) that may have been due had you sold it yourself, will no longer be applicable. 

Note, in any case, CGT as such is not due after 23 years of ownership, though social charges go on being payable until 30 full years.

Instead, inheritance tax will be due, on the €900,000 that is over and above your daughter’s French allowance of €100,000. 

This would work out at (5% x €8,072 = €403.60) + (10% x €4,037 = €403.70) + (15% x €3,823 = €573.45) + (20% x €536,392= €107,278.40) + (30% x €347,676 = €104,302.80) = €212,961.95, rounded to €212,962.

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Inheritance tax instalments

Unless your daughter is able to pay this outright, therefore, she is likely to have to ask for payment to be spread out (which can be allowed up to seven payments over three years), and to put the house on the market. 

Some interest is also due if asking for this paiment fractionné, but it is usually allowed, especially where the inheritance is mainly not in an easily liquidated form (as in a house). 

Guarantees are also asked for, which could be the house itself.

When she comes to sell the house, there may also be capital gains tax to pay if it sells for more than it was valued for in the estate, which will be worked out according to the usual rates (in the first years, CGT is at 19%+ 17.2% of social charges against the ‘gain’ element). 

A reduction of the taxable gain for length of ownership starts to accrue from the sixth full year.