Calls to eliminate inheritance tax have reignited a long-standing debate in France. Passing down a flat, business, or savings can trigger significant tax bills for heirs. Beyond political slogans, the key question remains: would removing this tax truly protect families, or simply safeguard already large fortunes?
How Inheritance Tax Functions in France
France is among the European countries where inheritance tax can be steep, particularly for those outside the immediate family. When someone dies, each heir is taxed individually on their share of the estate.
The final tax depends on two main factors:
- The value of the inherited assets each person receives
- The legal relationship between the heir and the deceased
Children benefit from a personal allowance of €100,000 per parent. Only the portion exceeding this limit is taxed progressively, with rates ranging from 5% to 45% for direct heirs, such as children or parents. Spouses and civil partners (PACS) are usually exempt.
Distant relatives, friends, or unmarried partners face far higher rates, potentially up to 60% after allowances, dramatically reducing their inheritance. French inheritance tax thus ranges from 5% for modest family inheritances to 60% for distant or unrelated heirs.
Tax obligations can extend to heirs living abroad or to assets held outside France, depending on residency and property location. Heirs typically must file a return and pay taxes within six months of the death (or a year if the deceased lived outside France). When estates lack liquid cash, families may be forced to sell property quickly to cover the tax, a point frequently cited by campaigners for reform.
Why Some Politicians Push for Abolition
Recently, prominent figures on the French right have advocated for completely removing inheritance tax. MEP Sarah Knafo supports this idea, framing it as a way to honor work and savings passed through generations.
Eliminating the tax would mean heirs pay nothing, regardless of the asset type or value. Advocates argue this would:
- Protect family homes from rushed sales to pay taxes
- Enable small and mid-sized businesses to transfer ownership to children or associates
- Reduce paperwork, legal fees, and stress during a difficult time
- Encourage long-term savings and asset building
Supporters often highlight that the current system disproportionately affects middle-class families who own property in rapidly appreciating areas. Although estates may appear large on paper, most of the wealth is tied up in property, not cash.
Impact on Families if Tax Disappears
The most immediate effect for families would be psychological: fear of a tax shock at the time of death would vanish. Parents could plan inheritances calmly, without worrying about selling a flat or business to cover taxes.
Scenario: The Paris Flat
A widowed parent owns a €700,000 flat in Paris and leaves it to one adult child. Currently, the child has a €100,000 allowance, leaving €600,000 subject to progressive tax, resulting in a significant five-figure bill. Without the inheritance tax, the child keeps the full value, deciding independently whether to live in, rent, or sell the property. Only notary fees and outstanding debts would remain.
Scenario: The Family Business
Consider a small manufacturing company worth €2 million with 15 employees, passed to two children. While French law offers reliefs for business transfers, the conditions are complex and sometimes heirs must sell shares to outsiders to cover taxes. Without inheritance tax, the transfer could proceed under company law alone, removing the fiscal shock while heirs still manage operations. Proponents argue this could help maintain local employment in family-run firms.
Funding the Missing Revenue
Inheritance tax generates several billion euros annually for the French state. Removing it would create a substantial gap, sparking debate over alternative funding sources. Economists suggest several options, each with trade-offs:
| Option | Potential Impact |
|---|---|
| Raise VAT or consumption taxes | Spreads the cost across all consumers, including those without significant assets |
| Increase income tax on high earners | Targets wealthier households but may face political pushback |
| Tax large fortunes during life instead of at death | Focuses on the very rich, but requires accurate asset valuation |
| Public spending cuts | Reduces services or benefits, impacting households differently |
