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International successions under French law : civil and tax aspects, by Maud Coudrais, lawyer at the Paris bar

Publié le 30/12/2024 - Mis à jour le 30/12/2024

INTERNATIONAL SUCCESSIONS

UNDER FRENCH LAW

CIVIL AND TAX ASPECTS

BY MAUD COUDRAIS

Attorney-at-Law, Doctor of Law

22, boulevard Saint-Germain - 75005 Paris

Tel. +33 (0)1 42 38 58 29 - Phone: +33 (0)7 89 33 70 03

mc@maudcoudrais-avocat.fr - www.maudcoudrais-avocat.fr

***

GOLDEN RULES FOR DEALING WITH AN INTERNATIONAL SUCCESSION

RULE N° 1:

Each country has its own legal system, even in international matters.

We must always reason from the point of view of a specific legal order.
For a complete analysis, it is necessary to place oneself successively from the point of view of each legal order that may be concerned.

This presentation summarizes the legal reasoning specific to the French legal system in the field of international succession.

RULE N° 2:

As soon as a situation has an international dimension, several legal orders are potentially involved.

Whatever the question, it is always necessary to first determine which rule will be applicable in determining the competent legal order.

In inheritance matters, two major questions arise:

-How to settle the estate? (Civil aspect) (1).

-How to tax the inheritance? (Tax aspect) (2).

HOW TO SETTLE AN INTERNATIONAL SUCCESSION UNDER FRENCH LAW?

In concrete terms, as a lawyer, you have to resolve two questions:

-Is the French legal system (notaries, courts) competent to regulate this succession? (1.1)

-If so, what will be the applicable law in the French legal system? (1.2)

In both cases, in accordance with Golden Rule No. 2, the first question is what rules apply to deal with these issues.

1.1. Is the French legal system competent?

Under Article 55 of the French Constitution of 4 October 1958, international conventions take precedence over rules of domestic origin:

'Treaties or agreements duly ratified or approved shall, from the time of their publication, have a higher authority than laws, subject, in respect of each agreement or treaty, to its application by the other party.'

Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession "shall apply to the successions of persons who die on or after 17 August 2015".

However, due to the limitation periods of French law, it is sometimes possible to deal with successions opened before this date. Successions opened before 1 January 2007 are subject to the thirty-year limitation period. Those opened from 1 January 2007 are time-barred after 10 years.

Court of Cassation, Civil, Civil Chamber 1, February 12, 2020, 19-11.668, Unpublished

1.1.1. Inheritances opened before 17 August 2015

Step 1: It is necessary to check whether there is an applicable bilateral agreement.

*Example 1: The Franco-Belgian Convention of 8 July 1899.

It only applies between French and Belgians, not between Belgians.

Cass. 1st civ., 10 Oct. 2012, n° 11-18.345, Bull. 2012, I, n° 194

*Example 2: The Franco-Italian Convention on the Enforcement of Judgments in Civil and Commercial Matters signed in Rome on 3 June 1930.

Cass. Civ., Dec. 13, 2023, No. 22-11.727

TGI Paris, 1st ch. 1st sect., 16 Dec. 2015, No. 14/13561

Cass. 1st civ., March 20, 2019, n° 18-11.490, Published in the bulletin

Cass. 1st civ., 11 July 1919. 2019, n° 18-14.186, Published in the bulletin

*Example 3: The Franco-Swiss bilateral convention of 15 June 1869:

2nd step: in the absence of a bilateral agreement, the following rules of conflict of jurisdiction of domestic origin will apply:

According to case law, the French courts have jurisdiction over movable property if the deceased was last domiciled in France, regardless of where it is located, and over immovable property, if it is located in France. The qualification of movable or immovable property is done by applying the categories of French law (law of the forum).

Court of Cassation, Civil, Civil Chamber 1, 14 April 2021, 19-24.773

In the alternative, i.e. in the absence of any other jurisdiction of the French courts based on the ordinary rules of conflict of jurisdiction and in the absence of an applicable international convention, the French court may recognise its jurisdiction to rule on a succession of movable property on the basis of Articles 14 and 15 of the Civil Code, i.e. if the plaintiff or the defendant are of French nationality, but only in matters of movable succession, with the exception of immovable successions and enforcement procedures carried out outside the national territory.

Cass., civ. 1, 17 November 1981, 80-14.728

*Example: the estate of the composer Maurice JARRE.

The artist died in 2009 in CALIFORNIA where he had resided for years. Among the many decisions rendered, the Court of First Instance of PARIS, in a judgment of December 2, 2014, rejected the objection of lack of jurisdiction, considering that the French courts had jurisdiction to rule on the movable succession on the basis of the provisions of Articles 14 and 15 of the Civil Code, both parties being of French nationality, even if the last domicile of the deceased was located abroad.

ECHR, case of JARRE v. France, 15 February 2024, n°14157/18

*Example of application to the death of a person who had his last residence in Switzerland but whose heirs are French, death that occurred in 2014.

CA Dijon, 3rd ch. civ., 24 Nov. 2022, n° 22/00420

*But exclusion from this possibility in the case of a rule of jurisdiction laid down by an international convention. Hence, for example, the exclusion of such a jurisdiction in the event of a Franco-Belgian conflict, due to the applicability of the Franco-Belgian Convention.

CA Aix-en-Provence, 1st ch. c, 23 June 2011, n° 10/12523

Exceptionally, the French courts may have jurisdiction to rule on a succession of immovable property even if the property is located outside France due to a reference made by the foreign law applicable to French law.

Cass. 1st civ., 23 June 2010, n° 09-11.901, Bull. 2010, I, n° 140

*Example with Spanish law which refers to French law:

Court of Cassation, Civil Chamber 1, January 23, 2007, 06-11.037, Published in the Bulletin

*Example of application with Italy:

CA Chambéry, 1st ch., 10 Sept. 2019, n° 16/00525

1.1.2. Successions opened on or after 17 August 2015

To determine whether the French legal system is competent to settle an inheritance opened as of 17 August 2015, Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 must be applied.

Reminder of the rules:

-Jurisdiction in principle of the courts of the Member State in which the deceased was habitually resident at the time of his death" (Article 4).

-Possibility of a choice of court agreement (Article 5).

- Possibility of declining jurisdiction in the event of a choice of law, under certain conditions (Article 6).

- Specific competence in the event of a choice of law (Article 7).

-Jurisdiction based on voluntary appearance (Article 9).

-Subsidiary powers in certain cases, where the deceased was not habitually resident in a Member State at the time of death (Article 10).

-Jurisdiction under the principle of forum necessitatis (Article 11).

The concept of last habitual residence:

*Example of last residence in Italy despite death in France in an apartment belonging to the deceased.

CA Paris, pole 3 ch. 1, May 25, 2022, n° 21/04423

*Example of the application of the nationality criterion to decide between several residences in France, Italy and Switzerland of a person living between these three countries.

CA Amiens, 1st ch. civ., 6 July 1914. 2023, No. 22/04492

*Example of the Johny HALLYDAY estate

The Nanterre High Court has been seized of a case concerning the estate of G-BT X, who died in Marnes-la-Coquette, known as O K and described as "the French Elvis". The plaintiffs, D X and B X, biological children of the deceased, challenge the validity of a holographic will drawn up in California which bequeaths the entire estate to his wife I K and, in the event of her pre-death, to his two adopted daughters Z and A. They invoke French inheritance law and European Regulation (EU) No. 650/2012 of 4 July 2012 to claim their share of the reserved portion. I K, in defence, maintained that her husband's last habitual residence was in California and requested that the French courts lack jurisdiction. The court, after analysing the evidence and considering the duration and regularity of the deceased's presence in France, as well as the conditions and reasons for this presence, determined that G-BT X's habitual residence was in France. Consequently, it declares that it has jurisdiction to rule on the succession and rejects the request for lack of jurisdiction raised.

Nanterre High Court, 28 May 2019, No. 18/01502

Question of the subsidiary jurisdiction of Article 10:

Section 10 of the Regulations:

'Where the habitual residence of the deceased at the time of death is not situated in a Member State, the courts of the Member State in which the assets of the estate are situated shall nevertheless have jurisdiction to rule on the succession as a whole in so far as:

(a) the deceased was a national of that Member State at the time of death; or, failing that,

(b) the deceased had his or her previous habitual residence in that Member State, provided that, at the time of the referral to the court, no more than five years have elapsed since the change of that habitual residence.

2. Where no court of a Member State has jurisdiction pursuant to paragraph 1, the courts of the Member State in which inheritance property is situated shall nevertheless have jurisdiction to rule on such property. »

The judge must if necessary relieve this subsidiary jurisdiction of its own motion.

CJEU, Court, 7 Apr. 2022, C-645/20

Cass. 1st civ., 21 Sept. 2022, n° 19-15.438

*Example with habitual residence in Singapore:

CA Bordeaux, 3rd ch. family, 21 March 2023, n° 22/04022

*Example with Switzerland:

TJ Paris, 2nd ch. 2nd sect., 1 August 2024, n° 22/06762

*Example with IRAN

CA Aix-en-Provence, ch. 2-4, 13 Jan. 2021, n° 20/05858

1.2. If the French legal system is competent, what law will it apply?

As inheritance is international, several national laws are potentially applicable.

It is therefore necessary to determine which one will be.

In order to do so, it is necessary to ask which conflict-of-law rule will apply.

However, under article 55 of the Constitution, international conventions take precedence over rules of domestic origin.

The rules applicable to international successions depend on the date on which the succession was opened, i.e. the date of the deceased's death: before 17 August 2015 (1.1) or as of 17 August 2015 (1.2).

1.2.1. Inheritances opened before 17 August 2015

1st step: is there an applicable international convention?

-In matters of international succession, the Hague Convention of 1 August 1989 on the Law Applicable to Succession to the Death of Persons provides for the application of "the law of the State in which the deceased was habitually resident at the time of death, when the deceased then possessed the nationality of that State" (art. 3, § 1). This law "governs the entire succession, regardless of the situation of the property" (Art. 7, § 1). However, it never came into force.

2nd stage: in the absence of an international convention, the rules of internal conflict are intended to apply.

When the death of the deceased occurred before 17 August 2015, the applicable rules have been laid down by the French courts.

The case law of the Court of Cassation distinguishes between movable and immovable property.

For movable estates, the Court of Cassation subjects them to the law of the State in whose territory the deceased had established the deceased's last domicile .

Cass. civ., 19 June 1939, Labedan

è The implementation of this conflict rule raises the question of determining the last domicile of the deceased.

*The last domicile should not be confused with the place of the last habitual residence. The concept of domicile within the meaning of Article 102 of the Civil Code should be understood as referring to the place of the person's "principal establishment".

*The last domicile of the deceased should not be confused with his tax domicile either.

Ex. Cass. 1st civ., 30 October 2006, n° 05-17849: the deceased (a tax resident in Switzerland) died in France, leaving his son and his second wife to succeed him. The son complained that the French courts had declared French law applicable to immovable and movable property dependent on his father's estate. For the movable inheritance, the son highlights the fact that his father's domicile is in Switzerland where he was established for tax purposes. The Court of Cassation dismissed the appeal on the grounds that the Court of Appeal:

*The last domicile should not be confused with the marital domicile.

For inheritance properties, the Court of Cassation subjects them to the law of the State on the territory they are located.

Cass. civ., 14 March 1837, Stewart

Cass. 1st civ., 21 March 2000, n° 98-15650: Bull. civ. I, n° 96

Cass. 1st civ., 20 June 2006, n° 05-14281: Bull. civ. I

-Thus, the question of the classification of movable or immovable property is decisive. With its borderline cases.

Ex. Cass. 1st civ., October 20, 2010, No. 08-17033: The Court of Cassation has thus considered that shares in a Swiss public limited company, "entitling to the exclusive use of an apartment, two cellars and an attic in Geneva", constitute movable property subject to the law of the deceased's last domicile, in this case to French law.

Step 3: Verify that the designated law should not be set aside under certain remedial mechanisms. Each legal order has its own legal mechanisms to try to limit the aberrations resulting from the application of the rules.

*The invocation of fraud against the law:

It consists in artificially modifying the connecting factor retained by the conflict-of-laws rule for the sole purpose of ousting the law it normally designates and replacing it with a more advantageous law.

*The indication of the public policy exception, when the application in France of the foreign law normally applicable to govern the succession would lead to a result contrary to the essential principles of the French legal order, with the application of French law.

Ex. Cass. 1st civ., 17 Nov. 1964: "an incapacity to inherit based on non-belonging to a particular religion is directly contrary to the principles of French law and in particular to that of freedom of conscience"

Is the respect of the reserved portion of French international public policy?

For the Court of Cassation, a foreign law designated by the conflict rule and ignoring the reserved portion of the estate is not in itself contrary to French international public policy. It may be set aside if its specific application in the present case leads to a situation incompatible with the principles of French law considered to be essential.

This rule was laid down by two judgments of the same day, one of which concerns the estate of the French composer Maurice JARRE.

Civ. 1re, 27 Sept. 2017, n^o16-13.151

Civ. 1re, 27 Sept. 2017, No. 16-17.198

It should be noted that the heirs also requested the application of the right of levy set out in Article 2 of the Law of 14 July 1819 on the abolition of the right of windfall and detraction. Under the terms of this provision, "in the event of the division of the same estate between foreign and French co-heirs, the latter shall levy on the property located in France a portion equal to the value of the property located in a foreign country from which they would be excluded, for any reason whatsoever, by virtue of local laws and customs." The Court of Cassation rejected this claim, considering that in its decision of 5 August 2011, the Constitutional Council had repealed Article 2 of the Law of 14 July 1819.

1.2.2. Successions opened on or after 17 August 2015

Reminder of the rules laid down by the Rules:

When the death of the deceased occurred on or after 17 August 2015, the applicable rules are those laid down by Regulation (EU) No 650/2012 of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of judgments, and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession.

This text allows you to choose your national law to govern the devolution of your property (art. 22 § 1).

In the absence of a choice, the law of the habitual residence (and therefore not the habitual residence) of the deceased applies, regardless of the nature of the property and regardless of its location (in France or abroad) (Article 21, § 1).

-Consequently, the decisive question is that of the location of the last habitual residence of the deceased.

In the preamble, Regulation (EU) No 650/2012 states that 'the authority responsible for succession should carry out an overall assessment of the circumstances of the deceased's life in the years preceding his death and at the time of his death, taking into account all relevant facts, in particular the duration and regularity of the deceased's presence in the State concerned and the conditions and reasons for that presence. The habitual residence thus determined should reveal a close and stable link with the State concerned, taking into account the specific objectives of this Regulation" (Reg. (EU) No 650/2012, Preamble, cons. 23).

Exceptionally, it is possible for the judge to apply the law of a State which is not that of the last habitual residence of the deceased, but of a State with which "at the time of death, the deceased had manifestly closer ties" (Article 21 § 2).

Corrective mechanism to protect the reserved portion under the Succession Regulation:

Before the entry into force of the "Succession" Regulation, French case law refused (see above) to recognise the rule of the reserved share as a matter of international public policy, and repealed Article 2 of the Law of 14 July 1819 providing for a right of levy for the benefit of French heirs, exercised on assets located in France.

However, the French legislator, in order to protect the reserve, adopted Law No. 2021-1109 of 24 August 2021, which provides in its Article 24:

"I.-Chapter III of Title II of Book III of the Civil Code is amended as follows:

1° Article 913 is supplemented by a paragraph worded as follows:

"Where the deceased or at least one of his or her children is, at the time of death, a national of a Member State of the European Union or habitually resident there, and where the foreign law applicable to the succession does not allow for any mechanism for the reserved portion of the protection of children, each child or his or her heirs or assigns may make a compensatory levy on the existing assets located in France on the day of death, so as to be restored to the reserved rights granted to them by French law, within the limits of those rights. » ;

2° Article 921 is supplemented by a paragraph worded as follows:

"When the notary finds, at the time of the settlement of the estate, that the reserved rights of an heir are likely to be affected by the gifts made by the deceased, he shall inform each heir concerned and known, individually and, where appropriate, before any division, of his or her right to request the reduction of the gifts which exceed the available portion."

II.-This article shall enter into force on the first day of the third month following the publication of this law and shall apply to successions opened as of its entry into force, including if gifts were made by the deceased before its entry into force. »

One may wonder about the compatibility of these French legislative provisions with the Regulation.

In theory, the consideration of this mechanism could be based on the public policy exception provided for in Article 35 of the European Regulation. However, the taking into account of this right to reservation is denounced by some legal writers as contrary to the unifying spirit of the said regulation.

However, several case law leaves a doubt.

In particular, the judgments of the European Court of Human Rights of 15 February 2024, in the cases of UColombier v. France and JARRE v. France, in which the Court considers that the right to reservation is not a human right.

In addition to the fact that in 2017 judgments, admittedly before the entry into force of the regulation, the Court of Cassation had refused to consider that the protection of the reserved portion was part of international public policy.

2. HOW TO TAX AN INTERNATIONAL INHERITANCE UNDER FRENCH LAW

In what case will French tax law be applied by the French State to tax an international inheritance?

Again, the question arises as to what rule to apply in resolving such an issue.

2.1. 1st step: is there an applicable international convention?

*Example: The Franco-Italian Convention for the Avoidance of Double Taxation with respect to Taxes on Inheritance and on Gifts and for the Prevention of Tax Evasion and Evasion signed in Rome on 20 December 1990 and entered into force on 31 December 1991.

è Exclusion of common rules in the case of a bilateral treaty on Franco-Italian inheritance (and gifts)

This is an important issue in view of the attractiveness of Italian inheritance tax and the severity of French taxation (except for the surviving spouse):

France:

According to French tax law, the surviving spouse or civil partner is exempt from any inheritance tax.

Personal allowance on inheritance tax:

Depending on their relationship with the deceased and their personal situation.

€100,000 for a child, a father or a mother,
€15,932 for a brother or sister,
€7,967 for a nephew or niece,
€1,594 in the absence of another applicable allowance.
People with disabilities who meet the conditions benefit from an additional allowance of €159,325.

Taxable share:

This is the basis for calculating the rights on your share:

Taxable share = taxable estate assets – personal allowance

Taxation scale:

A scale is applied to the taxable portion that differs according to the family relationship with the deceased.

It is a progressive scale, i.e. it applies in successive instalments to your taxable portion.

The scale for heirs in the direct line (father, mother, child and grandchild)

Rate	Applicable scale
Not exceeding €8,072	5 %
Between €8,072 and €12,109	10 %
Between €12,109 and €15,932	15 %
Between €15,932 and €552,324	20 %
Between €552,324 and €902,838	30 %
Between €902,838 and €1,805,677	40 %
More than €1,805,677	45 %

The Sibling Scale

Rate	Applicable scale
Less than €24,430	35 %
More than €24,430	45 %

Inheritance tax for parents up to the 4th degree

They are taxed at the rate of 55% only.

Inheritance tax for other heirs

They are taxed at the rate of 60% only.

Italy

The rates and exemptions established for inheritance and gift tax were provided for in Article 2(48) of Decree-Law No 262 of 2006.

In particular, the following rates apply:

4%, for transfers made to the spouse or relatives in the direct line (ascendants and descendants) to be applied to the total net value, exceeding for each beneficiary, the share of EUR 1 million;
6%, for transfers to siblings to be applied to the total net value, greater than €100,000 for each beneficiary;
6%, for transfers to other family members up to the fourth degree, relatives in the collateral line up to the third degree, to be applied to the total net value transferred, without the need to apply any deductible;
8%, for transfers to any other subjects to be applied to the total net value transferred, without the application of any deductible.

In addition to the deductibles of €100,000 and €1 million, there is an additional deductible, equal to €1.5 million, for transfers made to disabled persons, recognized as severe under Law No. 104 of 1992.

The main rules of the Franco-Italian tax treaty:

-Principle: taxation in the State of the last domicile of the deceased (Article 9) ("Property, whatever its situation, which forms part of the succession or a gift of a person domiciled in a State and which is not referred to in Articles 5, 6, 7 and 8, shall be taxable only in that State.")

- Except in the case of immovable property (Article 5), movable property belonging to a permanent establishment or a fixed base (Article 6), ships and aircraft operated in international traffic (Article 7), transferable securities (Article 8);

- Exclusion of double taxation: deduction in one country of the tax paid in the other (Article 11);

- Principle of non-discrimination (Article 12).

è taxation by Italian State in the event of the deceased's domicile in Italy, except for real estate and securities located in France

NB. Italian inheritance law generally more favourable:

*except for spouses because in France exemption from inheritance tax (but still higher deductible in Italy...)

The example of the question of the taxation of life insurance:

From the point of view of the French legal system, can the French State tax the life insurance policy opened by the deceased, a French tax resident, opened in an establishment located on Italian territory, knowing that the beneficiary is an Italian tax resident?

According to French civil law, the life insurance contract is in principle "outside the estate" (Article L132-12 of the Insurance Code).

However, in tax matters, French law provides for the taxation of life insurance policies even if they are located abroad at the time when the deceased was residing in France (Article 750 ter, 1° of the General Tax Code).

"The following are subject to free transfer tax:

1° Movable and immovable property located in France or outside France, and in particular public funds, interest shares, assets or rights making up a trust defined in Article 792-0 bis and the proceeds capitalised therein, receivables and generally all French or foreign transferable securities of any kind whatsoever, when the donor or the deceased is resident for tax purposes in France within the meaning of Article 4 B; »

In accordance with Article 8.1 of the 1990 Franco-Italian Bilateral Tax Convention, the life insurance policy, as a credit, is subject to tax exclusively in ITALY, the country where it is located.

Unfortunately, there is no accessible case law on the issue in a Franco-Italian situation.

According to my analysis, from the point of view of the French legal system, the French State does not have the right to tax the life insurance contract opened by the deceased, a French tax resident, held by an Italian institution located in Italy.

See also the Franco-Monegasque Convention

The applicable exemptions and allowances may vary depending on international tax treaties. For example, the Court of Cassation, Plenary Assembly, 2 October 2015, 14-14.256 ruled that the taxation relating to the transfer on death of shares in a company belonging to a deceased person domiciled for tax purposes in Monaco falls under the Principality of Monaco and not France, under the Franco-Monegasque Convention.

2.2. In the absence of an international tax treaty

The French tax rules of internet origin applicable to the taxation of an international inheritance are mainly governed by the General Tax Code (CGI).

- The principle of territoriality of taxation:

According to Article 750 ter of the General Tax Code, movable and immovable property located in France or outside France is subject to transfer tax free of charge when the donor or the deceased is tax resident in France. In addition, property located in France is also subject to these taxes even if the donor or the deceased does not have his or her tax domicile in France.

Determination of tax residency:

The definition of tax residence in France is established by several provisions of the General Tax Code (CGI).

Article 4 A of the General Tax Code:

"People who have their tax residence in France are liable to income tax because of all their income. Those whose tax domicile is located outside France are liable to this tax solely because of their income from French sources."

Article 4 B of the General Tax Code:

'1. The following shall be considered to have their tax residence in France: a. Persons who have their home or the place of their main residence in France;b. Those who carry out a professional activity in France, whether salaried or not, unless they can prove that this activity is carried out on an ancillary basis; c. Those who have the centre of their economic interests in France. »

Case law has clarified the application of these criteria. For example, the Council of State has ruled that the home is understood to be the place where the taxpayer normally resides and has the centre of his family interests, without taking into account temporary stays elsewhere due to the needs of the profession or exceptional circumstances

Council of State, 9th Chamber, 9 June 2021, 431551

In addition, the Administrative Court of Appeal of Douai confirmed that the place of the main residence can only determine the tax domicile in the event that the taxpayer does not have a home.

Administrative Court of Appeal of Douai, 3rd Chamber - 3-party formation, 2 May 2007, 06DA00929