France-China tax treaty: inheritance, dividends and permanent establishment

What France taxes when the family lives in China

• Deceased or donor domiciled outside France (Article 750 ter, 2°). Only assets located in France are taxed, but the concept covers real estate held through a company more than 50% controlled by the deceased and their family, and shares in unlisted foreign companies whose assets consist mainly of French real estate, in proportion to that real estate. Under these conditions, a Hong Kong or British Virgin Islands company does not take the Paris apartment out of French tax.
• Heir domiciled in France (Article 750 ter, 3°). A child domiciled in France on the date of transfer and for at least six of the previous ten years is taxed in France on everything received, including an apartment in Shanghai, with no Chinese tax to credit.
• Deceased domiciled in France (Article 750 ter, 1°). The entire worldwide estate is taxable, Chinese assets included.
• Rates and allowances. Between parents and children, an allowance of EUR 100,000 per parent and per child (Article 779), then rates from 5% to 45% (Article 777); gifts made in the previous fifteen years are added back (Article 784). The French return is due within one year when death occurs outside France (Article 641).
• Civil law. French courts apply Regulation (EU) No 650/2012: the law of the last habitual residence, unless the deceased chose the law of their nationality by will. The Regulation does not govern tax.

Five decisions on inheritance and permanent establishment

We have not identified, on Légifrance, a decision applying Article 5 of the 2013 agreement to the permanent establishment in France of a mainland Chinese company, or a decision on Article 750 ter concerning a Chinese family. The first four decisions below set the applicable rules; the last concerns the 2013 agreement itself.

• An heir domiciled in France is taxed, whatever the donor's domicile. In a case on distributions from a foreign trust, the Cour de cassation applies the rule of domicile in France for six of the previous ten years without requiring the donor to be domiciled there; it taxed the beneficiary at the 60% rate applicable between unrelated persons, no family link being proved (Cass. com., 6 November 2019, No. 17-26.985, under the wording of Article 750 ter then in force).
• A French subsidiary is not in itself a permanent establishment of its foreign parent. It is one only if it is not an independent agent and habitually exercises in France, in law or in fact, powers allowing it to bind the parent in commercial relations relating to the parent's own business. That was not the case for the French subsidiary of a Swiss company that signed leases with tenants and maintained properties (CE, section, 20 June 2003, No. 224407, Interhome).
• The French company that decides transactions in fact is a dependent agent. The employees of the French subsidiary of an Irish company habitually decided the transactions that the Irish company merely ratified: the subsidiary is a permanent establishment of the latter, and the formal signing of contracts abroad changes nothing (CE, 11 December 2020, No. 420174, Conversant International). See our commentary on the Conversant decision (in French).
• A registered office abroad does not protect management exercised in France. A Swiss company whose seat was a mere domiciliation address, and whose manager spent about 75% of his time in France administering the business, has a permanent establishment in France; the undeclared activity is treated as concealed (CAA Toulouse, 25 June 2026, No. 24TL01882, Ceremed Swiss, unpublished). See our commentary on the Ceremed case (in French) and our page on permanent establishment and corporate tax.
• The 60% base for equipment royalties applies only in the State of source. Paragraph 6 of the protocol to the 2013 agreement limits to 60% of the gross amount the base taxed at source; it has neither the object nor the effect of limiting the taxable base in the other State, where the royalties are taxable there (CAA Paris, 5 March 2026, No. 24PA03097, not published in the bulletin).

The rules that matter to an investor

• Taxes covered (Article 2). Income tax, corporate tax and contributions; according to the French tax authorities, also CSG, CRDS and the solidarity levy. Neither inheritance tax nor the French real estate wealth tax (IFI).
• Real estate (Articles 6 and 13, paragraphs 1 and 4). Rents and gains on French property are taxable in France, as are gains on shares in an entity deriving more than 50% of its value from French real estate at any time during the previous 36 months.
• Dividends, interest, royalties (Articles 10 to 12). Withholding capped at 10%; 5% for dividends paid to a company directly holding at least 25% of the capital for 365 days; a 60% base for equipment royalties, i.e. 6% at most, the limitation applying only to taxation in the State of source.
• Permanent establishment (Article 5). A fixed place of business (place of management, branch, office, factory, workshop); a construction, assembly or installation site lasting more than twelve months; services, including consultancy, provided by employees present in the State for more than 183 days in twelve months; a person who habitually has authority to conclude contracts in the name of the enterprise (paragraph 5). Control of one company by another does not in itself make it a permanent establishment (paragraph 7). Text of the 2013 agreement, which the multilateral convention may supplement.
• Substantial holdings (Article 13, paragraph 5). Gains on shares in a French company remain taxable in France if the seller held at least 25% of the capital at any time in the previous 12 months.
• Double tax relief (Article 23) and anti-abuse. A credit equal to the Chinese tax, capped at the French tax, for dividends, interest, royalties and real estate gains; a credit equal to the French tax for other income taxed in China. The principal purpose test of the multilateral convention replaces Article 24.