10 January 2022

French inheritance tax on Swiss properties

  • Articles
  • Inheritance / Succession
  • Real Estate

Heirs resident in Switzerland of a deceased person who died in France must also pay French inheritance tax on real estate located in Switzerland. The burden can be significantly reduced if the deceased held the property during his lifetime in a special form of company, a so-called "Pacte Dutreil".

  • Dr. Walter Frei

    Legal & Tax Partner

If the Gallic cock crows ... and calls for taxation, this unwanted call can also reach Switzerland. Among other things, this can happen in inheritance cases.

France subjects the worldwide estate to inheritance tax if (i) the deceased had his last residence in France or (ii) the heir has his residence in France.

France terminated the former double taxation treaty (DTA) with Switzerland of 31 December 1953 for the avoidance of double taxation in the field of inheritance taxes on 31 December 2014. As a result, properties located in Switzerland are also subject to French inheritance tax.

For example, if an owner of a Swiss property with last residence in France dies and leaves the property to an heir with residence in Switzerland, the Swiss heir becomes liable to inheritance tax in France. In this case, Switzerland is also entitled to record the transfer of the property with inheritance tax, unless the heir is exempt from inheritance tax due to his or her relationship to relatives in the corresponding canton in which the property is located. However, under French tax law, the Swiss tax on the acquisition of the property is credited in full against the French inheritance tax, so that under unilateral French tax law double taxation is ultimately avoided. However, this Swiss tax must be claimed in France by the end of the second year following the year of the inheritance tax declaration. However, there is no longer an exemption from taxation with regard to real estate, as under the old DTA with France.

The tax rates are progressive and amount to up to 45% for direct descendants and up to 60% for non-relatives.

French tax law recognises a special form of reduction of inheritance tax by means of a so-called "Pacte Dutreil". In this case, the asset is used commercially on the basis of a partnership agreement. The partners undertake not to sell their partnership shares for a certain period of time. If the conditions of a "Pacte Dutreil" are met, three quarters of the transferred partnership shares are exempt from inheritance tax.

The questions surrounding this "Pacte Dutreil" are complex and must be clarified on a case-by-case basis. MME's Private Client Team will be prepared to assist you with these or other questions relating to taxation in France.
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