Inheritance and gifts · no treaty between France and Luxembourg

France-Luxembourg estate tax: two domestic laws, no referee

France and Luxembourg have never signed an inheritance and gift tax treaty. Each State applies its own territorial rules, and only the tax credit of Article 784 A of the French tax code partly limits the risk of paying twice. Luxembourg exemptions for direct descendants do not protect an heir domiciled in France.

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How is an estate taxed between France and Luxembourg?

With no estate tax treaty, each State applies its domestic law. France taxes worldwide assets when the deceased was domiciled in France, only French assets when the deceased was domiciled abroad, and all assets received by an heir domiciled in France for at least six of the last ten years (Article 750 ter of the French tax code). Luxembourg taxes the estate of a resident of the Grand Duchy on all assets, in principle except real estate located abroad, and the estate of a non-resident on Luxembourg real estate only.

Where both States tax, France credits, only in the cases of 1° and 3° of Article 750 ter, the Luxembourg tax paid on assets located outside France (Article 784 A of the French tax code). The credit does not cover foreign tax paid on assets located in France, and it is useless when Luxembourg levies nothing, which is the case for the statutory share received by a child.

French tax code, Articles 750 ter and 784 A; France-Luxembourg tax treaty of 20 March 2018, Article 2; Luxembourg law of 27 December 1817 on inheritance tax.

— In brief
Treaty
None for inheritance; the 2018 treaty covers only income and capital
French side
Article 750 ter: domicile of the deceased, assets located in France, heir domiciled six years out of ten
Luxembourg side
Inheritance tax for a resident, death transfer duty on real estate for a non-resident
Watch point
The Article 784 A credit only covers foreign tax paid on assets located outside France
— The rules of each State

Who taxes what, absent a treaty

  • France, deceased or donor domiciled in France (Article 750 ter, 1°). All assets, in France or abroad, are taxable: a Luxembourg account, SOPARFI shares or an apartment in Kirchberg fall into the French estate.
  • France, deceased or donor domiciled outside France (Article 750 ter, 2°). Only assets located in France are taxable, but the notion is broad: real estate held directly or through companies more than 50% controlled by the deceased and family, shares in unlisted foreign companies whose assets are mainly French real estate, shares in French companies, claims on debtors established in France.
  • France, heir domiciled in France (Article 750 ter, 3°). An heir, donee or legatee domiciled in France on the date of transfer and for at least six of the previous ten years is taxed on all assets received, whatever the domicile of the deceased.
  • Luxembourg, deceased resident of the Grand Duchy (last domicile or seat of wealth in Luxembourg). Inheritance tax applies to all the deceased's assets, except real estate located abroad and, under conditions, certain foreign movable assets. The statutory share received by direct descendants is exempt, the share beyond it being taxed; everything received by the spouse is exempt, as is what a partner receives where the declaration has been registered for at least three years; other transfers are taxed according to the family relationship.
  • Luxembourg, non-resident deceased. Only a death transfer duty is levied, on real estate located in Luxembourg. The Luxembourg bank accounts and life insurance policies of a French resident are not taxed there on that basis.
  • The French tax credit (Article 784 A). In the cases of 1° and 3°, tax paid outside France is credited against French tax, up to the tax paid on movable and immovable assets located outside France; the tax authorities also limit the credit to the French tax relating to those same assets. Luxembourg tax paid on assets located in France is never creditable.
  • Civil law (Regulation (EU) No 650/2012). The estate is governed by the law of the deceased's last habitual residence (Article 21), unless the deceased chose the law of their nationality (Article 22); a European Certificate of Succession proves heir status in the other State (Article 62). The Regulation does not apply to tax matters (Article 1): it says who inherits, not who taxes.
— Three worked examples

What the absence of a treaty really costs

Example 1, parent resident in Luxembourg, child in Paris. A widowed mother domiciled in Luxembourg leaves, without a will, EUR 1,000,000 of bank assets to her only son, domiciled in Paris for fifteen years. In Luxembourg, this statutory share in direct line is exempt. In France, the son is taxed under Article 750 ter, 3°: after the EUR 100,000 allowance, the duty reaches EUR 212,962, with no Luxembourg tax to credit.

Example 2, parent domiciled in France, apartment in Luxembourg. A father domiciled in Nancy leaves EUR 2,000,000, including an apartment in Luxembourg, to his only daughter. France taxes everything: EUR 617,394 of duty after the allowance. If Luxembourg levies a death transfer duty on the apartment, which the exemption of the statutory share in direct line may rule out, it is credited against French tax under Article 784 A; the deceased's accounts and securities are not taxed in Luxembourg.

Example 3, dual domicile. A retiree keeps his house in Moselle, where his wife lives, and an apartment in Luxembourg where he spends half the year. If France treats him as domiciled in France (Article 4 B of the French tax code) and Luxembourg as a resident (domicile or seat of wealth), each taxes his movable assets; the characterisation turns on the facts, not on a simple day count. For French accounts, the Luxembourg tax is not creditable in France; no treaty decides between the two States. Domicile must therefore be settled during lifetime, with evidence.

— Planning ahead

The levers that work between the two countries

  • Settle and document domicile. To avoid example 3, each parent's tax domicile must be unambiguous under Article 4 B of the French tax code and under Luxembourg law.
  • Give early to children domiciled in France. The EUR 100,000 allowance per parent and per child is renewed every fifteen years (Articles 779 and 784 of the French tax code), and a gift of bare ownership reduces the taxable base under the Article 669 scale.
  • Review Luxembourg life insurance policies. On death, the French regime depends on the insured's age when premiums were paid (Article 757 B for premiums paid after 70, Article 990 I otherwise) and the link to France on the domicile of the insured and the beneficiaries, not on the insurer's country; the beneficiary clause must reflect this. See our analysis of CAA circular 26/1 and our page on life insurance and international transmission.
  • Check structures. A Luxembourg company owning French real estate does not take that property out of French scope; a wealth holding company controlled from France may also fall, for financial years ending on or after 31 December 2026 and subject to asset and passive income thresholds, within the Article 235 ter C tax.
  • Choose the succession law. A French national living in Luxembourg, or the reverse, can designate the law of their nationality by will, to align civil devolution with the wealth structure.
— What to understand

Luxembourg's exemption does not protect an heir domiciled in France

Luxembourg exempts the statutory share received by direct descendants, and everything received by the surviving spouse or by a partner whose partnership declaration has been registered for at least three years. Many families conclude that the assets of a parent living in Luxembourg will pass free of duty. That overlooks the third criterion of Article 750 ter of the French tax code: a child domiciled in France for at least six of the last ten years is taxed in France on everything received, at French rates, with no Luxembourg tax to credit.

The absence of a treaty has another consequence: no rule decides between two States that each consider the deceased their resident. A parent who lived between Metz and Luxembourg may see the estate fully taxed in both countries, with no treaty mutual agreement procedure to resolve it: only each State's domestic remedies remain.

— Who is concerned

Four common situations

Parents in Luxembourg, children in France

The costliest case: Luxembourg exemption for direct descendants, full French taxation for the child domiciled in France.

French residents with assets in Luxembourg

Luxembourg accounts, portfolios and policies are taxed in France; Luxembourg taxes only the real estate of a non-resident.

Families with two homes

Retired cross-border workers, couples split between Lorraine and the Grand Duchy: risk of full double taxation.

French property in a Luxembourg company

France taxes French real estate held indirectly, even on the death of a non-resident.

— Frequently asked questions

What we are asked about France-Luxembourg estates

Is there an inheritance tax treaty between France and Luxembourg?

No. The treaty of 20 March 2018 covers only taxes on income and capital. Inheritance and gifts fall under each State's domestic law alone, double taxation being mitigated only by the Article 784 A credit of the French tax code.

My father lived in Luxembourg and I live in France: will I pay French inheritance tax?

Yes, if you have been domiciled in France for at least six of the ten years preceding the death: you are taxed in France on everything you receive, at French rates, after a EUR 100,000 allowance. The Luxembourg exemption of the statutory share in direct line leaves no foreign tax to credit.

Is a Luxembourg bank account subject to Luxembourg inheritance tax?

Not when the holder was domiciled outside Luxembourg: the death transfer duty on a non-resident only covers Luxembourg real estate. The account does, however, fall into the French estate if the deceased was domiciled in France or if the heir meets the six-out-of-ten-years test.

Does Luxembourg life insurance escape French inheritance tax?

Not as such. The Article 990 I levy or, for premiums paid after 70, the Article 757 B duties apply where the insured or the beneficiary has the required link to France, whatever the insurer's country. A Luxembourg policy offers protection safeguards and management flexibility, not an exemption.

Which law decides who inherits: French or Luxembourg?

The law of the State of the deceased's last habitual residence, unless the deceased chose by will the law of their nationality (Regulation (EU) No 650/2012). This civil law does not change taxation, which each State sets for itself.

Can taxes paid in Luxembourg always be set against French duty?

They are credited, not deducted, and only if they relate to assets located outside France that France taxes under 1° (domicile of the deceased) or 3° (domicile of the heir for six of the last ten years) of Article 750 ter (Article 784 A of the French tax code). Proof of the Luxembourg payment must accompany the French estate return.

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© BENSAID Avocats. The information on this site does not constitute legal advice. Sources: French tax code, Articles 750 ter, 784 A, 990 I and 757 B; Regulation (EU) No 650/2012 of 4 July 2012; Luxembourg law of 27 December 1817 on inheritance tax.