France has an extensive network of conventions relating to inheritance rights, with no less than 34 bilateral conventions. Only seven of these conventions also relate to gifts.
Historically, an additional convention, signed on 31 December 1953, covered inheritance rights in relations between France and Switzerland.
This convention, considered too favourable by the French authorities, was terminated by France when no agreement was reached on a new convention. Thus, each country has been free to apply its own internal taxation since 1 January 2015.
The lack of a convention sometimes leads to detrimental fiscal consequences.
A recent instance of this made headlines: a deceased Swiss tax resident (Canton of Geneva) bequeathed his French bank accounts to two distant cousins, who were French tax residents.
In such a case, the Geneva tax system applies taxation between non-relatives at a rate varying between 50% and 55% (Article 4 LCACant and Article 21 LDS) after a basic tax exemption of CHF 500.
The French tax system applies taxation at a fixed rate of 60% (Article 777 CGI) after an allowance of EUR 1,594 (Article 788 IV CGI).
Neither State allows the deduction of taxes paid abroad. In Switzerland because there is no such system, and in France because the existing system (Article 784 A CGI) does not apply to rights relating to property located in France. As a result, in this very specific case the taxation may exceed the value of the asset received.
This is what led M.P. Alexandre Sabatou (Rassemblement National, Oise) to ask the Ministry of Economy, Finance and Industrial and Digital Sovereignty if the ratification of a new convention between these States was envisaged (PQ no. 2235, OJ 18/10/2022 p. 4635).
The answer (OJ 07/02/2023 p. 1133) was categorical: France, like many States, no longer wishes to enter into such conventions and the French-Swiss context is therefore not unusual.
The risks of double taxation, in relations with Switzerland as with any other State not regulated by a convention, must therefore be identified upstream and a strategy is required to prevent such risks.
Written by: Guillaume Etain, Althémis Paris – France
