Are there French inheritance taxes imposed on a beneficiary where the deceased was a US citizen, resident of the US and the assets were all in the United States?
This is a common question we are asked. The question concerns the application of inheritance tax in France when a French tax resident inherits from parents who are U.S. citizens residing in the United States, with assets located exclusively in the U.S. The issue is to determine whether this situation gives rise to taxation in France and, if so, whether a tax treaty between France and the United States may limit or eliminate such taxation.
France and the United States have signed a tax treaty to avoid double taxation in matters of inheritance tax. This treaty provides that assets located in the United States and transmitted by a deceased person domiciled in the U.S. are not taxable in France, except for determining the effective rate applicable to other assets that may be taxable in France.
In the event of potential double taxation, Article 784 A of the CGI provides a mechanism allowing the foreign tax paid to be credited against the French tax due. However, under the France–U.S. tax treaty, this mechanism should not apply, since assets located in the U.S. are not taxable in France.