Individuals bound by a civil partnership exempt from inheritance tax

Individuals bound by a civil partnership entered into abroad are exempt from inheritance tax in France.

The first decision applying the exemption from inheritance tax in France to persons bound by a “civil partnership” under English law has been made.

By the combined application of Articles 796-0 bis of the CGI(French Tax Code)  and Article 515-7-1 of the Code Civil, “Civil partnership” under English law between two people has full legal effect and tax in France.

The exemption under section 796-0 bis of the CGI is applicable and the tax administration is therefore ordered to reimburse the taxpayer money already received by way of transfer taxes relating to the estate of her partner, together with interest.

* Court decision: TGI Bobigny June 8, 2010 No. 09-3968

This decision is the first to apply the provisions of Article 515-7-1 of the Code Civil in drawing the consequences in terms of inheritance. Resulting from the law 2009-526 of 12 May 2009, Article 515-7-1 of the Civil Code allows civil partnerships registered abroad regularly to produce effects in France.

On the fiscal front, the administration has learned the consequences of this text by equating these partnerships (called Pacs), both under the Income Tax Act as rights of inheritance tax (Rep. of Rugy: NA 1-12-2009 p. 11428 No. 53004, Inst. 5 B-4-10 and 7 G-2 -10). It follows that in matters of inheritance, partners can benefit from the exemption transfer duty under Article 796-0 bis of the CGI.

The administration has said that two British nationals resident in France and united by a “civil partnership, registered in the United Kingdom, shall benefit from the exemption upon the death of one of them, under Article 796-0 bis (cited Inst. 7 G-2-10 No. 2).

In this particular case, the estate left by the death in France of one of the two partners had a building in which the partners resided at death. The heir partner had filed a declaration of succession with a request to split payment of installments. Then he requested a refund of fees paid by invoking the exemption under section 796-0 bis of the CGI.

The tax service had rejected his application, finding that the conditions for the exemption were not met. According to them, the provisions relating to PACS implies that people who entered into such an agreement settling a common residence in France to organize their material life, the acquisition of a second home in France does not satisfy this requirement.

According to the Court on the contrary,  it is sufficient that the effects of the partnership are the same as those of the PACS and it is not contrary to public order for the exemption to apply. In this case, the documents produced by the heir, in particular a consultation with a British law professor, have shown that these conditions were met.

It is worth noting that the head tax service did not appeal the ruling.