Because of the estate taxation laws and succession rules in France, many international owners of French property found it advantageous to purchase their homes through a local company structure. For Britons the requirement to purchase in this way to protect their French real estate from inheritance tax and unfair laws of succession unfortunately rendered them liable for a benefit-in-kind taxation in the UK on the use of their French property.
Now, thank goodness, we can bring you some positive news for owners of French property because the government is not only scrapping this tax, they are making the ruling retrospective so that all those who have paid the tax can actually claim it back.
In France the inheritance tax rules and the way succession works means that one has very little say over what happens to ones estate in France upon death. The rules and laws date back to Napoleonic times, so, far be it for us to suggest that they may be a little out dated, but suffice to say that you have little control over who actually inherits from you once you die! When it comes to property, it was only in the last year or so that the new president has make transfers between spouses tax exempt!
As part of the rules of succession, a share in your home in France has to be passed to your children for example, and everyone (apart from your spouse) is taxed on anything they inherit. The amount they are taxed depends on their relationship to you – for example, if you’re not married but have been living as common-law spouse with your partner and they inherit, they will be subject to 60% tax!
Naturally all of these complicated and quite frankly outdated and unfair rules mean that Britons buying in France tend to do so through an SCI company structure or société civile immobilière. In so doing, the property is owned by the company and the buyer owns the company and has shares in it which they can then will as they please. This got round the problems of succession and inheritance tax in France…but it caused another taxation headache. In the past, British owners of French property who bought in this way were then subjected to a benefit-in-kind tax by the British government for effectively personally enjoying the assets of the company!
The good news that we can bring you today is that this will no longer be the case. The government has scrapped this taxation and it has done so retrospectively. What this means is that anyone who has been paying this tax over the past 20 years can claim back what they have paid. Our advice is to speak to your accountant for the best way to proceed.