More and more Dutch people in France are aware of the fact that from 17 August 2015 you can choose to apply Dutch inheritance law to your estate. Due to this choice of law, despite the fact that you live in France, Dutch inheritance law will always apply.
What people often fail to realise is that opting for Dutch inheritance law does not mean that you then also opt for Dutch inheritance tax. Inheritance tax and inheritance tax are not regulated from Europe, so each country still applies its own tax rules.
And that may mean that, despite the fact that you have opted for Dutch inheritance law on your estate, your heirs may also be liable for inheritance tax in France!
A practical example
Cor van den Broek's heirs found that out painfully.
Cor van den Broek had lived in France for more than 20 years. His property consisted of a house in France worth €150,000 with a modest mortgage of €45,000 on it. He also had a current account in the Netherlands containing a small amount for unforeseen expenses.
When it became clear that he would not have long to live, he decided to return to the Netherlands and register here. The house in France was put up for sale.
Since his desired heirs (his brother and niece) lived in the Netherlands, Cor decided to make a will with a Dutch notary. On the advice of the Dutch notary, he included a choice of law for Dutch inheritance law just to be sure; after all, you can never know. In addition, he appointed his brother and niece as sole heirs and a godson received a cash sum of €20,000.00, simply as a gesture.
Cor still managed to sell the house in France himself at the French notary, but died a few days later. A few days after the death, the French notary paid the proceeds of the house into the French bank account.
Nothing to arrange in France?
Cor's brother and his daughter contacted me about the further settlement of the inheritance saying that "everything would go through Dutch law" and that, apart from closing the bank account, there would be nothing to settle in France.
However, I had to help them out of the dream. Because Cor still had assets in France, inheritance tax will have to be paid on these assets in France. And because the French notary, contrary to Cor's wishes, had deposited the money in a French bank account, practically the entire assets will also have to be taxed in France. This in addition to the Dutch inheritance tax to be paid because Cor was a Dutch resident.
Double payment of inheritance tax
Since higher rates apply in France than in the Netherlands (brother 45% and a niece 55%), a substantial part of the inheritance will have to be handed over to the French tax authorities. Of the net balance of the inheritance, €105,000.00, taking into account the French exemptions, only just over half will remain, of which €20,000.00 will also go to the godchild.
A small consolation: in the Netherlands, an allowance can be claimed for the inheritance tax payable because of the Double Taxation Avoidance Decree. Except, of course, for the godchild. He pays only in the Netherlands on his acquisition and at a rate of "only" 30%.
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