Inheritance Tax and France: What the Treaty with Germany Provides

Published on 15.10.2026

Inheritance Tax: France-Germany Treaty

Anyone who lives in France, owns property there or has children resident in France soon faces the question, when planning their succession, of how the inheritance tax treaty between France and Germany works. Since 2009, a separate treaty has applied that covers estates and, unlike in relation to Switzerland, also lifetime gifts. It allocates taxing rights and provides for a credit for the tax of the other state. However, it cannot prevent a double burden in every case, because it expressly allows both states to tax heirs resident in their own territory.

The treaty does not itself create any tax liability. Whether tax arises in Germany follows from the Inheritance and Gift Tax Act (Erbschaftsteuer- und Schenkungsteuergesetz, ErbStG); the treaty limits this right and regulates the credit. This article looks at the treaty from a German perspective, as at October 2026. The amount of French tax should be clarified by an adviser or notary admitted in France.

Inheritance Tax and France: The 2006 Treaty at a Glance

Germany has concluded inheritance tax treaties with only a few states. Besides France, these are the United States, Switzerland, Sweden, Greece and Denmark. With all other states, only the unilateral tax credit under Section 21 ErbStG remains, the limits of which are described in the article on Inheritance tax and double taxation treaties.

The “Agreement between the Federal Republic of Germany and the French Republic for the avoidance of double taxation with respect to taxes on estates, inheritances and gifts” was signed in Paris on 12 October 2006 (Federal Law Gazette, BGBl. 2007 II p. 1402). It entered into force on 3 April 2009 and, under Art. 19 (2), applies to estates and gifts from that date. It must be distinguished from the German-French double taxation agreement of 21 July 1959 on taxes on income and capital, which does not cover inheritance tax.

The treaty applies if the deceased at death or the donor at the time of the gift had a residence in one or both states (Art. 1). It covers German inheritance and gift tax and the French droits de mutation à titre gratuit (Art. 2 (3)), but not the substitute inheritance tax (Ersatzerbschaftsteuer) on German family foundations (Art. 2 (4) sentence 2).

Residence within the Meaning of the Treaty

Almost all allocation rules are linked to residence. Under Art. 4 (1), a person is resident in the state in which their estate or gift is taxable by reason of residence, permanent stay or a similar criterion. Anyone who is taxable in a state only on the assets located there is not resident there within the meaning of the treaty.

For Germany, number 2 of the Protocol contains an important addition: a German national who, at the time of death or of the gift, had been outside Germany for no more than five years without having a dwelling available in Germany is deemed to be resident in Germany. This mirrors the domestic five-year rule of Section 2 (1) no. 1 sentence 2 letter b ErbStG. Anyone moving from Germany to France therefore initially remains resident in Germany for treaty purposes as well.

Dual Residence: The Tie-Breaker Rules

If, according to these criteria, a person is resident in both states, Art. 4 (2) sets out an order of priority: first the permanent home, where there are homes in both states the centre of vital interests, then the habitual abode, then nationality and finally a mutual agreement between the tax authorities. How this test works in general is explained in the article on the Basics of double taxation treaties for emigrants.

The Nationality Rule of Art. 4 (3)

A special feature of the German-French treaty is Art. 4 (3). Under this provision, a person resident in both states is, notwithstanding the tie-breaker rules, deemed to be resident only in their state of nationality if they

• held the nationality of only one of the two states,
• clearly intended not to maintain their residence in the other state permanently, and
• had been resident in the other state for a total of less than five years in the seven years immediately preceding death or the gift.

This concerns, for example, Germans working in France on a temporary basis; the temporary nature should be documented.

The interaction between number 2 of the Protocol and Art. 4 is important: anyone who has given up their German home and lives in France is resident under both laws during the first five years. Under Art. 4 (2), allocation would then lead to France via the permanent home. However, the nationality rule of Art. 4 (3) regularly corrects this result in favour of Germany as long as its conditions are met: only German, not also French, nationality; the clear intention not to maintain the residence in France permanently; and, in the last seven years before death or the gift, a total of less than five years of residence in France. The rule is intended to keep Germany as the state of residence in the first years. How residence and habitual abode are determined under German law is shown in the article on Habitual abode in tax law.

Who May Tax What? Allocation by Type of Asset

Basic Rule: State of Residence of the Deceased

Under Art. 9, assets not covered by Art. 5 to 8 can, regardless of their location, be taxed only by the state in which the deceased or donor was resident. According to number 4 of the Protocol, this includes in particular cash, claims of any kind (and therefore also bank balances), shares and company interests. An account at a French bank held by a deceased resident in Germany is therefore in principle taxable only in Germany, unless the acquirer rule applies (see below).

Immovable Property (Art. 5)

Real estate may be taxed by the state in which it is located. What constitutes immovable property is determined by the law of the state in which it is situated; claims secured by mortgages or land charges are not included, whereas rights of use in real estate are (Art. 5 (2)). The state of residence does not lose its taxing right as a result: it also taxes the foreign property and credits the tax of the state in which it is situated.

Real Estate Companies (Art. 5 (3) and (4))

The rules on companies are important in practice, because French real estate is often held through a company, such as a société civile immobilière. Under Art. 5 (3), shares in a company are deemed to be immovable property in the state where the real estate is situated if more than half of the company’s assets consist, directly or indirectly, of real estate in a contracting state. Business premises used by the company itself are disregarded.

Art. 5 (4) goes further: real estate is deemed to form part of the estate if it belongs to a company in which the deceased, alone or together with spouses, relatives in the direct line or siblings, holds more than half of the shares; indirectly held real estate is taken into account only proportionately under number 3 of the Protocol. Because German law does not recognise such attribution, the last sentence of Art. 11 (2) limits the credit for French tax in Germany to the portion corresponding to the ratio of the real estate taxable in France to the company’s total assets. Under number 6 of the Protocol, this limitation does not apply if German law allows corresponding taxation. Anyone holding French real estate through companies should therefore have the credit calculated in advance.

Permanent Establishments, Ships and Movable Property (Art. 6 to 8)

Permanent establishment assets and the assets of a fixed base of self-employed professionals may be taxed by the state in which they are situated (Art. 6); Art. 7 applies to ships and aircraft. Tangible movable property such as furniture or art may, under Art. 8, be taxed by the state in which it is located, but not if it was there only temporarily at the time of death (Protocol number 4). The furnishings of a holiday home may therefore be allocated to France, but jewellery in one’s travel luggage probably not.

Deduction of Debts (Art. 10)

Debts are allocated to the assets with which they are economically connected, for example a loan to purchase the French property; other debts reduce the assets under Art. 9, and any excess is ultimately taken into account in the other state (Art. 10 (5) to (7)).

The Special Feature: The Heir’s Residence Also Counts

On one point, the treaty departs significantly from the pure residence principle. Under Art. 11 (2) letter b, Germany may, notwithstanding Art. 9, tax the entire acquisition of an heir, legatee or donee who was resident in Germany at the time of death or of the gift. Conversely, under Art. 11 (1) letter c, France may tax the entire acquisition of an acquirer resident in France. The explanatory memorandum (Denkschrift) of the Federal Government on the treaty expressly describes this as an option for the acquirer’s state of residence to tax the acquirer.

The acquirer’s state of residence then credits the tax of the other state under its own law, unless it relates to assets that are situated in its own territory under Art. 5 to 8. If little or no tax arises in Germany because of the allowances of Section 16 ErbStG (EUR 400,000 per child, EUR 500,000 for spouses), there is little to credit there for the heir living in France; the French tax ultimately remains. This is not double taxation in the technical sense, but it can be considerably more expensive than a purely German estate. How France calculates the tax, which allowances apply there and what requirements French law places on the heir’s residence should be examined by an adviser in France.

Conversely: if the deceased lives in France and the heir in Germany, the acquisition is already subject to unlimited tax liability in Germany under Section 2 (1) no. 1 ErbStG because the acquirer is a resident (Inländer), and the treaty permits this taxation via Art. 11 (2) letter b.

Avoiding Double Taxation: Credit on Both Sides

Both states avoid double taxation by the credit method, not by exemption.

Germany as the state of residence of the deceased credits, under Art. 11 (2) letter a, the tax paid in France on assets that may be taxed in France under Art. 5 to 8, such as the holiday home. The credit is limited to the portion of German tax attributable to these assets. If the French tax is higher, the excess remains a burden; if it is lower, Germany levies the difference.

France as the state of residence of the deceased taxes the entire assets under Art. 11 (1) letter a and credits German tax on the assets taxable in Germany under the treaty, likewise subject to a maximum amount.

France as the state where assets are situated determines the tax rate for the French assets of a deceased without French residence according to the rate applicable to all assets taxable there under French law (Art. 11 (1) letter b). This works like a progression proviso: even assets that France may not tax under the treaty, such as a French bank account, can increase the French tax rate on the real estate. The treaty does not contain a corresponding progression proviso in favour of Germany.

In Germany, the credit is applied under Section 21 (4) ErbStG with corresponding application of Section 21 (1) to (3) ErbStG: upon application and against documentary proof of the French tax paid, with a certified translation of foreign-language documents where necessary. Where the treaty applies, the credit itself follows from Art. 11 (2) letters a and b; the unilateral credit under Section 21 (1) ErbStG with its limits, such as the five-year period of Section 21 (1) sentence 4 ErbStG, is displaced to that extent. For cases outside the treaty, Section 21 ErbStG remains decisive.

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Example: Heir Resident in France

Example (fictitious): Bernd lives in Freiburg and dies in 2026. He leaves his daughter Clara, who has lived in Lyon for many years, a securities account at a German bank and a holiday home in Brittany.

• As the state of residence of the deceased, Germany taxes the entire acquisition. Clara receives the allowance of EUR 400,000 for children. For the holiday home, Germany credits the French tax upon application, at most up to the proportionate German tax.
• France may tax the holiday home as the state where it is situated (Art. 5). Because Clara is resident in France, France may additionally tax her entire acquisition including the securities account (Art. 11 (1) letter c) and credits the tax paid in Germany on the securities account under French law.
• If the acquisition in Germany falls wholly or largely within the allowance, little tax arises there that France could credit. The French tax on the securities account then essentially remains.

Planning must therefore not stop at the residence of the deceased; the will and the distribution of assets should take the acquirer rule into account, as described in general terms in the article on Wills when resident abroad.

Lifetime Gifts

Unlike the treaty with Switzerland, the German-French treaty also covers gifts (Art. 1 letter b). The acquirer rule of Art. 11 also applies to donees. Anyone transferring assets during their lifetime to a child living in France must therefore expect French gift tax, even if the gift remains within the allowance in Germany. Under Section 14 ErbStG, the German allowances become available again every ten years; whether this staggering brings any economic benefit for an acquirer in France depends on the French rules. General legal planning approaches are shown in the article Avoiding inheritance tax legally.

If the German tax treatment of an arrangement is unclear, a binding ruling (verbindliche Auskunft) from the tax office under Section 89 (2) of the Fiscal Code (Abgabenordnung, AO) can be applied for in advance; the French side should be clarified with an adviser locally.

Cases before April 2009

The treaty does not apply to estates and gifts before 3 April 2009. In that case, only the unilateral credit under Section 21 ErbStG remains in Germany, which under Section 21 (2) ErbStG covers only foreign assets within the meaning of Section 121 of the Valuation Act (Bewertungsgesetz, BewG) where the deceased was a German resident. French capital assets such as bank balances or securities are not included. The Federal Fiscal Court (Bundesfinanzhof, BFH) confirmed the refusal to credit French inheritance tax on such capital assets in an estate from 2000 (BFH, judgment of 19 June 2013, II R 10/12, lower instance Baden-Württemberg Fiscal Court, 7 K 1935/10). For estates today, the treaty alleviates this problem, because France, as the mere state where assets are situated, may not tax bank balances under Art. 9 as long as no acquirer lives in France.

Procedure, Deadlines and Dispute Resolution

In Germany, every acquisition subject to inheritance tax must be notified to the tax office within three months of becoming aware of it under Section 30 ErbStG, even if proceedings are running in France at the same time. Failure to do so may be treated as tax evasion by omission (Section 370 (1) no. 2 AO). The French filing obligations and deadlines should be clarified by the notary or adviser locally.

Which succession law applies is determined by the European Succession Regulation, in principle according to the last habitual residence; details are explained in the article on International succession law when emigrating. If German succession law applies, the period for disclaiming an inheritance is six weeks, or six months if the deceased’s last residence was only abroad or the heir was abroad when the period began (Section 1944 of the German Civil Code, BGB). What forms part of the estate also depends, for spouses, on the applicable matrimonial property regime.

In the case of taxation contrary to the treaty, a mutual agreement procedure can be requested irrespective of an objection or legal action, within three years of the first notification of the measure (Art. 13 (1)). If the authorities do not reach agreement within 24 months, they may agree on an arbitration commission (Art. 14); the treaty does not grant a right to this.

Practical Tips

• Document residences: Changes of residence and the length of stay of the deceased and heirs should be verifiable.
• Examine real estate and companies separately: A separate credit limit applies to real estate held through companies; there is a separate article on the succession law issues when inheriting real estate abroad.
• Secure evidence: Without French assessments and proof of payment, there is no credit in Germany.

Conclusion

The German-French treaty has applied to estates and gifts since 3 April 2009. It allocates real estate, permanent establishments and tangible movable property to the state in which they are situated and other assets to the state of residence of the deceased or donor. At the same time, it allows the acquirer’s state of residence to tax the entire acquisition. Both states credit the tax of the other, under their own law and subject to maximum amounts. Because allowances and tax rates differ, the overall burden can be higher despite the treaty than in a purely German case. Residences and the asset structure should therefore be examined early and in coordination with advisers in France.

Frequently Asked Questions

Is there an inheritance tax treaty between Germany and France?

Yes. The treaty of 12 October 2006 entered into force on 3 April 2009 and applies to estates and gifts from that date. It must be distinguished from the 1959 treaty on taxes on income and capital.

Who taxes a holiday home in France if the deceased lived in Germany?

Both states. France may tax the property as the state where it is situated (Art. 5). Germany taxes the entire acquisition and, upon application, credits the French tax on the house, at most up to the proportionate German tax (Art. 11 (2) letter a).

Does my child have to pay inheritance tax in France even though I live in Germany?

That is possible. If the child is resident in France at the time of the inheritance, France may tax the entire acquisition under Art. 11 (1) letter c and credits the German tax under French law. If the acquisition remains within the allowance in Germany, there is little to credit. The amount of French tax should be examined by an adviser in France.

Does the treaty also apply to gifts?

Yes. Unlike the treaty with Switzerland, it also covers lifetime gifts if the donor is resident in one of the two states. The acquirer rule also applies to donees.

What applies to estates before April 2009?

In that case, the treaty does not apply. In Germany, only the credit under Section 21 ErbStG remains, which does not cover French capital assets of a deceased resident in Germany; the BFH confirmed this in its judgment of 19 June 2013 (II R 10/12).

Attorney Dr. Johannes Fiala and the Munich-based firm, which focuses on international succession law, tax law and asset protection, advise testators, donors and heirs with a connection to France on the application of the German-French inheritance tax treaty, from examining residence under the treaty and the credit for French tax to planning lifetime transfers. Dr. Fiala has published extensively on questions of emigration and asset protection. Please get in touch with the firm without obligation to discuss your individual situation in an initial consultation.