A tax with a strong symbolic dimension and a dynamic product
The inheritance tax system is characterised by its interaction with the civil inheritance system and is structured by the differentiation of allowances and rates according to the relationship to the deceased. The allowances are €100,000 for an inheritance going to a child, €15,932 for an inheritance going to a brother or sister, and €7,967 for an inheritance going to a nephew or niece. The inheritance tax scale for direct descendants has seven brackets, ranging from 5 % to 45 %. For collateral inheritances, tax rates are both higher and less progressive. Assets inherited by married or civil union spouses, on the other hand, are fully tax-exempt. Inheritance tax receipts more than doubled between 2011 (€7.0bn) and 2023 (€16.6bn). This increase is partly due to legislative changes in 2011 and 2012, but also and above all to the growth in the value of assets, particularly property, over the period.
A dynamic tax whose base is, however, reduced by a number of mechanisms
France ranks first among OECD countries for the weight of Transfer taxes on gratuitous transactions, including inheritances and gifts (DMTG) in GDP. The revenue from this tax more than doubled between 2011 and 2023, even though the inheritance tax base has been significantly reduced by various mechanisms. For example, the so-called "Dutreil Pact" scheme provides an exemption from gift or inheritance tax for transfers of company shares. Similarly, the tax treatment of life insurance capital paid on the death of the policyholder is also more favourable than under ordinary law. Thus, only the fraction of premiums in excess of €30,500 paid after the policyholder's 70th birthday is subject to inheritance tax if the policy was taken out after 20 November 1991. Lastly, when full ownership of a property is transferred, the bare owner is exempt from inheritance tax on the usufruct he or she receives under the property division mechanism.
Ongoing modernisation of tax management
Registration fees for inheritance declarations are administered by the local departments of the Directorate General of Public Finances. The time taken to process cases has been increasing since 2018 and varies greatly from one department to another. The gradual introduction of electronic declarations, from 2025, should help to reduce delays. In addition, the tax treatment of life insurance capital paid out on the death of the policyholder poses management difficulties in terms of distribution among beneficiaries. The Court therefore recommends that a system be put in place for insurers to transmit information on the beneficiaries of each life insurance
policy to the e-registration platform. Lastly, the planning of inheritance tax audits combines local planning based on the monitoring carried out by agents responsible for registering inheritance tax returns with data analysis using data mining tools. Recalled inheritance tax averages €15,402 per inspection in 2022 and has been rising since 2020. Disputes between taxpayers and the tax authorities are usually settled out of court.
A tax that is poorly understood and poorly accepted, but debated
Misunderstood by the French, inheritance tax is one of the least accepted forms of taxation. Yet its redistributive function is emphasised by economic theory. Inheritance tax has been the subject of numerous reform proposals pursuing different objectives. The exemption mechanisms should be questioned because they de facto benefit the largest estates. Other proposals, on the other hand, recommend either the abolition of inheritance tax, given the high level of wealth taxation in France, or a more targeted reduction in response to certain changes in society. The aim is to encourage an earlier transfer of assets or to reduce the tax burden on collaterals and stepchildren. In order to accurately assess the effects of these reform scenarios, the Court recommends that a statistical study be carried out before any legislative changes are made, as precise data is largely lacking.
In the light of these issues, the Court considers that any reform of inheritance tax should necessarily be carried out on a constant basis. This would involve broadening the tax base by reducing tax benefits, as well as applying a targeted reduction in tax rates to make the tax fairer.
