Germans settled in France
Domiciled in France, they pass on all their assets under French duties, including their accounts and securities in Germany.
Paris treaty of 12 October 2006 · inheritance and gifts
France-Germany estates: French duties and Erbschaftsteuer
Since 3 April 2009, a treaty has allocated between France and Germany the right to tax inheritances and gifts. It does not remove dual jurisdiction: each State keeps the right to tax an heir domiciled there, provided it credits the other State's tax. The final outcome depends on the domicile of the deceased, that of the heirs and the nature of each asset.
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How is an estate taxed between France and Germany?
The treaty of 12 October 2006 applies to estates of persons who died, and gifts made, on or after 3 April 2009, where the deceased or donor was domiciled in France, in Germany or in both. Immovable property, including shares in real estate rich companies, is taxable in the State where it is located; assets of a permanent establishment, in the State of the establishment; tangible movables, where they are situated. In principle, bank accounts, receivables, securities and shares in non-real estate companies fall to the State of domicile of the deceased or donor (Articles 5 to 9).
The treaty nevertheless reserves to each State the right to tax all assets received by an heir or donee domiciled there, crediting the tax paid in the other State (Article 11). On the French side, German tax is credited up to the French tax on the same assets.
France-Germany treaty of 12 October 2006 on inheritance and gift taxes, Articles 1, 5 to 9 and 11, and Article 19 for entry into force, text published on impots.gouv.fr.
— In brief
- Text
- Treaty of 12 October 2006 and its protocol, in force on 3 April 2009
- Taxes covered
- French gift and inheritance duties; Erbschaft- und Schenkungsteuer
- French method
- Credit for German tax, capped at the French tax on the same assets
- Watch point
- An heir domiciled in the other State remains taxable there on everything received
— Domicile and allocation of assets
Articles 4 to 9, in the order they apply
- Domicile (Article 4(1) and (2)). A person domiciled in both States under their laws is allocated, in order, to the State of their permanent home, then their centre of vital interests, their habitual abode and their nationality; failing that, the two administrations decide. Persons taxed in a State only on assets located there are not domiciled within the meaning of the treaty.
- Temporary expatriates (Article 4(3)). A person who holds only the nationality of one State and is domiciled in both is allocated to the State of nationality if they clearly intended not to remain indefinitely in the other State and had been domiciled there for less than five years in total during the seven years preceding the death or gift.
- Germans who left less than five years ago (protocol, point 2). A German national who had been staying outside Germany for no more than five years, without a home there, is regarded as domiciled in Germany within the meaning of Article 4(1). A recent move to France therefore does not exclude Germany: the conflict is then resolved by the criteria of paragraphs 2 and 3.
- Immovable property and real estate companies (Article 5). Immovable property is taxable in the State where it is located. Shares in a company whose assets consist, directly or through other companies, of more than half of immovable property located in a State are regarded as immovable property located in that State, excluding property used in the company's own business (paragraph 3). In addition, the property itself is deemed part of the estate where the deceased, alone or with their spouse, ascendants, descendants, brothers and sisters, holds more than half of the rights in the company that owns it, pro rata to the fraction held where there are intermediate companies (paragraph 4 and protocol, point 3). Shares in a French SCI whose assets consist mainly of French property are therefore, in principle, taxable in France; the composition of the assets and the use of the property must be checked on the documents.
- Permanent establishments and fixed bases (Article 6). Movable business assets attached to a permanent establishment or a fixed base are taxable in the State where it is located.
- Tangible movables (Article 8). Taxable in the State where they are situated, unless they were only passing through at the time of death. Cash, receivables, shares and interests are not tangible movables (protocol, point 4).
- All other assets (Article 9). Bank accounts, securities portfolios, shares in non-real estate companies, receivables, contracts: they are taxable only in the State of domicile of the deceased or donor, subject to the rule for heirs domiciled in the other State.
— Debts and tax credit
How the two taxes combine
Debts (Article 10). Debts incurred to acquire, build, convert, repair or maintain immovable property are deducted from the value of that property; those of a permanent establishment or fixed base, from their value; those relating to ships, boats and aircraft or to tangible movables, from the value of those assets; other debts, from the Article 9 assets. If a debt exceeds the value of the assets against which it is set, the balance is deducted from other assets taxable in the same State, then from those taxable in the other State.
Deceased domiciled in France (Article 11(1)(a)). France taxes all assets, including those the treaty allocates to Germany, and deducts the German tax paid on the latter. The deduction is capped at the share of French tax attributable to those assets, computed at the average rate of the estate where the scale is progressive.
Deceased domiciled in Germany (Article 11(1)(b)). France taxes only the assets the treaty allocates to it, mainly property and real estate companies located in France, but at the rate corresponding to all the assets it could tax under its domestic law.
Heir or donee domiciled in France (Article 11(1)(c)). Even where the deceased was domiciled in Germany, France may tax all the assets received by that heir, in accordance with Article 750 ter of the French Tax Code, which targets heirs domiciled in France for at least six of the previous ten years. It then credits the German tax paid on those assets, except on those it already taxes as the State of location. Germany applies a similar mechanism to heirs domiciled there (Article 11(2)(b)), with its own credit cap and a specific rule for property held by controlled companies.
Mutual agreement (Article 13). In case of taxation not in accordance with the treaty, the competent authority of either State may be approached within three years of the first notification of the measure at issue. After 24 months without agreement, the two administrations may agree to arbitration (Article 14).
— French duties and Erbschaftsteuer
Two taxes built differently
- Who is taxable. Both taxes are due by the heir on their share. Under domestic law, France taxes on the basis of the domicile of the deceased, or of the heir domiciled in France for six of the last ten years; Germany, on the basis of the domicile of the deceased or the heir, and continues to tax its nationals who left no more than five years ago without keeping a residence there.
- Direct-line allowances. In France, €100,000 per parent and per child, renewable every fifteen years; the surviving spouse and civil partner are exempt from inheritance duties. In Germany, €400,000 per child, €500,000 for the spouse, €200,000 for a grandchild whose parent is alive, and gifts are aggregated over ten years.
- Rates. In France, 5% to 45% in the direct line, with a 20% band up to €552,324 of taxable value. In Germany, for class I (spouse, children, grandchildren), 7% to 30%, the rate applying to the whole taxable share according to the band reached; classes II and III go up to 43% and 50%.
- A worked example. A parent domiciled in Paris leaves a €1,000,000 securities portfolio to an only child domiciled in Munich. France, as State of domicile, taxes: after the €100,000 allowance, duties amount to about €212,962. Germany also taxes the child, who is domiciled there: after the €400,000 allowance, its tax would be €90,000 (15% of €600,000), but it credits the French tax paid on those securities, which exceeds it. German tax is thus reduced to zero, and the total burden remains the French tax.
- Life insurance. Death benefits under a life insurance policy follow specific French rules (Articles 990 I and 757 B of the Tax Code), separate from inheritance duties; their treatment between the two countries must be examined policy by policy.
— What to understand
The higher of the two taxes remains payable
The 2006 treaty is one of the few recent French treaties on inheritance, and one of the few that also covers gifts, like the 1978 France-US treaty. It deals with property held through companies, the deduction of debts and the domicile of temporary expatriates.
The mechanism is credit. Where the deceased is domiciled in France, or an heir is domiciled there, France taxes and credits the German tax; Germany does the same for its residents. In practice, the family often bears the higher of the two taxes. In simple cases in the direct line, French duties, with a €100,000 allowance per child, frequently exceed German tax, with a €400,000 allowance, but the result depends on prior gifts, each country's own exemptions and the value retained: that is where planning comes in.
— Who is concerned
Four common situations
French nationals settled in Germany
Their property in France remains taxable in France; their French accounts and securities fall to Germany, except for an heir domiciled in France for at least six of the previous ten years.
Children living in the other country
A child domiciled in Germany who inherits from a parent domiciled in France is also taxable in Germany on what they receive.
Temporary expatriates
An assignment of a few years does not necessarily move the domicile for estate purposes: the treaty contains a five-out-of-seven-years rule.
— Diagram
Who taxes what, and who gives credit, at a glance
The three situations of Article 11 of the 2006 convention, read with the allocation of assets in Articles 5 to 9.
— Frequently asked questions
What we are asked about France-Germany estates
My parent domiciled in Germany owned a house in France: does France tax the estate?
Yes, for the house: immovable property is taxable in the State where it is located (Article 5). France applies the rate corresponding to all the assets it could tax. Germany, as State of domicile, taxes the whole estate and credits the French duties paid on the house.
The house was held through an SCI: does that change the outcome?
In principle, no. Shares in a company whose assets consist of more than half of property located in France are treated as immovable property located in France, including through intermediate companies (Article 5(3)). And where the family holds more than half of the company, the property is deemed part of the estate (Article 5(4)). As a rule, the SCI therefore does not move taxation out of France; only property used in the company's own business is left out of the calculation.
I live in France and inherit from a parent domiciled in Germany: am I taxed in France?
Yes, if you were domiciled in France for at least six of the ten years preceding the inheritance: France may then tax everything you receive (Article 11(1)(c) and Article 750 ter of the Tax Code). It credits the German tax paid on those assets. As French duties are often higher, a balance may remain payable in France.
Does the treaty apply to gifts?
Yes, unlike most French inheritance treaties. A gift made by a person domiciled in France or Germany follows, for the most part, the same allocation and credit rules as an estate; a few rules, such as the one on movables in transit, apply only to estates. The look-back period differs: fifteen years in France, ten years in Germany.
I am German and have lived in France for three years: which State will tax my estate?
Probably both, and the treaty decides. As a German national who left no more than five years ago without a home in Germany, you are still regarded as domiciled there (protocol, point 2). If you no longer have a home in Germany and were domiciled in France for less than five years out of seven with the clear intention of not staying, Article 4(3) allocates you to Germany; otherwise, the permanent home and vital interests tests apply. Your property in France remains taxable in France in all cases.
Are a deceased person's debts deductible in both countries?
They are allocated. A loan that financed a property is deducted from that property in the State where it is located; other debts are deducted from the assets taxable in the State of domicile; any unabsorbed excess passes from one State to the other (Article 10).
Does the 1959 tax treaty also cover estates?
No. It covers taxes on income and wealth, as well as the former business and land taxes; inheritance and gifts are governed by the 2006 treaty, which refers to it only for non-discrimination. We cover it on our France-Germany tax treaty page.
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— Further reading
The Franco-German corridor
Tool
Read the treaty article by article
The tax treaty atlas: text, articles and amendments, with the country preselected.
Voir la page GuideFrance-Germany tax treaty
The 1959 treaty and the 2015 protocol: cross-border workers, pensions, dividends.
Voir la page GuideLife insurance and international transmission
Life insurance in a transmission across several countries.
Voir la page PracticeNon-resident taxation
French-source income, withholding taxes, filing obligations.
Voir la pageAn estate between France and Germany to organise?
Confidential first conversation. The firm reviews the French side and the application of the 2006 treaty, working with the German notary and Steuerberater.
© BENSAID Avocats. The information on this site does not constitute legal advice. Sources: France-Germany treaty of 12 October 2006 on inheritance and gift taxes and its protocol, published on impots.gouv.fr; BOI-INT-CVB-DEU-20; French Tax Code, Articles 750 ter, 777 and 779.