French Goverment Seeks To Simplify Inheritance Tax

by Ulrika Lomas, Tax-News.com, Brussels

19 November 2008

In an endeavour to improve public relations and provide legal clarity, the French government has confirmed its intention to simplify the existing system of inheritance tax.

Inspired by Olivier Fouquet's report regarding legal certainty for taxpayers, the Finance Ministry is currently in the process of finalising a new procedure pertaining to inheritance and donations. Extolled by Budget Minister Eric Woerth, the new initiative forms part of the amended finance bill for 2008, to be presented to the Council of Ministers on November 19. If the text is ratified by Parliament, the reforms will enter into force from next year.

The revised proposals stipulate that within the three months following the fiscal declaration of an inheritance or donation, the taxpayer may voluntarily request a tax audit, leading to two possible scenarios:

Firstly, should the tax office fail to carry out an audit within that one year following the request, then the 'declaration of succession' will automatically be deemed correct and the matter closed.

Alternatively, if the tax authority conducts an audit within the specified one-year period, and the auditor judges that an error has been made, for example regarding the valuation of a property, adjustments may be made by the taxpayer, without incurring a penalty. Conversely, if the taxpayer has overpaid, then a tax refund will be granted. In the case of a dispute, the tax officer’s ruling will be final.

Until now, the tax authority has been empowered to carry out a tax audit on an inheritance or donation up to three years following the declaration.

The finance ministry intends to review the new system in three years' time.

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