Today is: 30 July 2010
Important Note: - The information given here is for information only and is of a general nature and is not exhaustive or comprehensive. French taxation and property law are technical and complex areas of law and you should not act or refrain from acting without comprehensive specialist advice on the facts of your case. Please note that Sykes Anderson LLP does not provide investment advice.
Q: Is it true that there is no business property relief for Inheritance Tax in France as we know it in the UK?
A: It is true that there is no business property relief in France of the same type that exists in the UK, but there are other reliefs which may assist entrepreneurs.
Q: What type of relief is there?
A: A reduction of 3/4 of the inheritance tax (or gift tax if a lifetime gift is made) payable by the beneficiary.
Q: What assets does the relief cover?
A: A gift of an individual business which is not incorporated and has an industrial, commercial artisan, agricultural or professional activity and any of the assets used by the business. Individual businesses run through an EURL (one person) company are treated the same was as individual businesses that are unincorporated for the purpose of this relief.
Q: Does that mean that there is no business property relief for shares in companies?
A: No, shares in some companies may also qualify for the relief subject to conditions.
Q: What do I have to do to make sure my beneficiaries get the relief if I run an individual business?
A: If you purchased the business, you have to have owned it for 2 years at the date of your death/gift. If you inherited it, were gifted it or created the business there is no minimum period you have to have owned it for.
Q: What do the beneficiaries (the people who receive the business/its assets in my estate or by gift) have to do to get the relief?
A: Each of the beneficiaries who receive the business/its assets has to undertake to keep the assets within the business for 4 years after they've received them.
Q: Is that all?
A: No, in addition, one of the beneficiaries must carry out the business for 3 years from when they received their share in the business/its assets. Carrying out the business must be the principal activity of the said beneficiary and this is subject to a strict definition.
Q: You said that the relief can apply to shares, is that only shares in an EURL (one person company)?
A: No, you can get the relief for other shares under certain conditions. First the shares have to be in a company that has an industrial, commercial artisan, agricultural or professional activity.
Q: Does the company have to be a French company?
A: No. If you are French resident and own shares in a UK Company the same tax Inheritance tax relief applies.
Q: What do I have to do to make sure my beneficiaries get the relief if I have shares in a qualifying company?
A: You need to put in place a shareholders' agreement, signed by you and at least one other shareholder and covering a minimum number shares under which you all undertake to keep the shares. The undertaking to keep the shares must:
- be for a minimum of 2 years;
- be in force at the time of death/transfer; and
- apply to 34% of the shares if they are unquoted or 20% of the shares if they are quoted.
Q: Can anything be done by my heirs, if I don't sign up to an undertaking in my lifetime?
A: Yes, subject to the conditions below and additional criteria, it may be possible for one of the heirs to make the undertaking on your behalf.
Q: What do the beneficiaries (the people who receive the shares in my estate or by gift) have to do to get the relief?
A: Each of the beneficiaries who receive the shares has to undertake to keep the shares received for 4 years from the date the original undertaking expires.
Q: Is that all?
A: No, in addition, one of the beneficiaries or one of the other shareholders party to the original undertaking, must carry on for the remainder of the duration of the original undertaking and 3 years from when they received the shares, either their principal activity or the role of director.
November 2008