Individual residents in France are subject to income tax on their worldwide income, wealth tax and gift/inheritance tax on their worldwide assets, subject to tax treaties. Non-residents of France are subject to the same taxes on their French source income and French assets, as qualified under internal rules and tax treaty provisions. The French tax system provides multiple income tax, wealth tax and gift/inheritance tax exemptions as regards business assets, works of art and family assets transferred between spouses, civil partners and among family members.

Territoriality Rules for Income Tax Purposes

The criteria that are generally applied in relation to income tax, subject to applicable tax treaties, if any, are embedded in Articles 4A and 4B of the Tax Code.

Article 4A provides that “Persons who have their tax residence [domicile fiscal] in France are subject to income tax on all their income. Those who have their tax residence outside France are subject to such tax only on their French-source income”.

Article 4B provides that “Those persons regarded as having their tax residence in France within the meaning of Article 4A are:

• those persons who have their home [foyer] or [if that cannot be determined] the place of their principal abode in France;
• those who have a professional activity in France, salaried or not, unless they can establish that such activity is conducted only on an ancillary basis; and/or
• those who have the centre of their economic interests in France”.

Territoriality Rules for Gift and Inheritance Tax Purposes

Liability for French gift (inheritance) tax depends – with reference to the time of gift or death (transfer) – on the tax residence of the transferor (donor/deceased), of the transferee (donee, heir or legatee) and of the assets for French tax purposes.

Territoriality Rules for Wealth Tax Purposes

Territoriality rules follow a rationale similar to that of gift and inheritance tax, so that, subject to tax treaties:

• if the owner of the wealth is a tax resident of France, the properties are subject to wealth tax irrespective of their location;
• if the owner is not a French tax resident, only French-situs properties are subject to tax; and
• properties situated outside France that an individual owns on January 1st of each of the five years following the calendar year in which they become a resident of France are not subject to wealth tax during those five years.

Personal Income Tax

A few preliminary comments.

• Dividends and interest received by residents and non-residents from French corporations are subject to a flat tax of 12.8%.
• French taxpayers are subject to social contribution taxes (referred to below as the “social tax”) that operate as a personal income tax; social contribution taxes, added together, are levied at the flat rate of 17.2%.
• Specific personal income tax rates apply (75%) when so-called “non-cooperative jurisdictions and territories” (états et territoires non coopératifs) are involved.
• A “tax shield” (plafonnement fiscal) – whereby the total amount of taxes due from a taxpayer, including personal income tax and wealth tax, may not exceed 75% of that person’s annual income – has been reintroduced for French tax residents.

Residents of France are subject to personal income tax according to a progressive brackets system with a marginal rate of 45% above EUR158,000 on their worldwide income (wages, bonus, commissions, industrial or commercial profits, professional fees, rental income, etc) plus social tax. An additional tax is due:

• at the rate of 3% between EUR250,000 and EUR500,000 and 4% above EUR500,000 for a taxpayer who is single;
• at a rate of 3% between EUR500,000 and EUR1 million and 4% above EUR1 million for married couples and members of a PACS (civil pact between different or same sex couples).

Non-residents of France are subject to French personal income tax (sometimes payable at source) on their earned income on the basis of a brackets system with a minimum tax rate due at 20%. Artists and athletes who are not established in France are subject to personal income tax at the rate of 15% with respect to income earned in France, which can be increased to 75% when non-cooperative jurisdictions and territories are involved. Specific rules apply to income generated within life-insurance vehicles as well as income withdrawn by the policy owner during the life of the policy.

Taxation of Capital Gains

Capital gains realised by tax residents of France on the sale of securities are subject to a levy of 12.8% or to the progressive brackets system, plus social tax. Non-residents of France are fully exempt on the condition that they have not held, during the five years preceding the sale, directly or indirectly, alone or with certain close relatives, more than 25% of the share capital of the relevant French entity. Some tax treaties can provide different rules for qualifying “substantial”/controlling participation in a French entity.

Capital gains realised on the sale of French real estate are taxed at a rate of 19% when the vendor resides in an EU member state, 33.3% otherwise and 75% when non-cooperative jurisdictions and territories are involved. Social contributions of 7.5% are due in addition to capital gains tax, plus a surtax of between 2% and 6% depending on the amount of the gain (6% applies above EUR260,000).

Gains realised upon sale of a principal family home are fully exempted. A gull capital gains tax exemption applies after 30 years of ownership, rebates being annually applicable as from the sixth year of ownership for income tax and social contribution charge purposes.

Inheritance Tax and Gift Tax

Between parents and direct descendants, the tax is computed in accordance with a brackets system. The marginal rate is 45% above EUR1.805 million, subject to a basis reduction of EUR100,000 (available every 15 years).

There is no inheritance tax between spouses or members of a PACS. Lifetime gifts between such couples are subject to tax at the marginal rate of 45% above EUR1.805 million, subject to a basis reduction of EUR80,000.

Other rules apply to siblings (45% above EUR24,000) and non-relatives (60%).

Wealth Tax

Wealth tax is payable every year on the basis of a person’s total real estate net value. Wealth tax was heavily reformed as from 2018.

The applicable wealth tax rates are progressive. For instance, it amounts to 0.5% of net wealth between EUR800,000 and EUR1.3 million and 1.5% above EUR10 million.

As regards a tax resident of France, the taxable basis is made up of the individual’s worldwide properties, less local taxes and the wealth tax itself. Non-residents are liable to wealth tax only as to their French-situs properties. Bank loans are deductible from the wealth tax basis, if granted for the acquisition/renovation of taxable properties, subject to conditions and time limits, especially for in fine bank loans.

Wealth tax is subject to certain limitations other than those mentioned above, such as a 30% rebate on the individual’s residence.

Corporation Tax

As from 2021, the standard rate of corporate tax is 15% up to EUR42,50038,120, and 25% on profits above that, irrespective of whether or not the profits are distributed. A surtax of 3.3% is applicable to entities that are subject to corporate tax and pay an amount of tax higher than EUR763,000, including those that enjoy a reduced rate of 15% (small and medium-sized businesses).

It is worth noting that the transfer of the registered office of a French corporation to another EU member state is no longer characterised as a cessation of business for tax purposes. As a consequence, the profits of the relevant year and latent capital gains are no longer immediately subject to corporate tax. In the event that the transferred corporation leaves assets in France for the purpose of carrying on its business, the corporation becomes a permanent establishment and the profits of the establishment are liable to French corporate tax.

Property Tax (Taxe Foncière)

Property tax is assessed on the basis of a special, administratively set, value. The land tax rate is set each year by the local government.

Housing Tax (Taxe d’Habitation)

Housing tax is due from anyone who owns, rents or uses a furnished residence (be it their main residence or a secondary home). This tax is computed by applying the rate set by the local government to the rental value of the property. The date of reference is January 1st each year. Therefore, whoever the occupant is on that date pays the tax.

Registration Tax (Droits d’Enregistrement)

Sales of real estate are subject to tax at the rate of 5.09% (excepting sales of buildings – not land – that are subject to VAT, acquisitions by realtors for the purpose of resale and sales of certain types of rural buildings, which are subject to registration tax at the rate of 0.715%).

The sale of shares of a French or foreign company owning predominantly, directly or indirectly, French real estate must be registered in France through a French notary (notaire) within the month following the signature of the purchase deed. Registration duties are due on that occasion at the rate of 5% assessed on the sale price.

Sales of shares of stock are subject to tax of 3% on shares of a société à responsabilité limitée (SARL) and 0.1% on shares of a société anonyme (SA).

Annual 3% Tax

Under Articles 990D to 990G of the tax code, French-situs real estate owned by unlisted foreign entities and trustees, directly or indirectly, is liable to an annual 3% tax based on the market value of the real estate. The following are, however, exempt:

• companies located in jurisdictions that have a tax treaty with France that includes an administrative assistance clause ensuring co-operation in the area of fraud and tax evasion, on the condition that the relevant company annually discloses to the revenue services the location, nature and market value of the real estate, the identity of the company’s shareholders and the number of shares held by each of them; and
• legal entities that have their effective seat of management in France, as well as legal entities abroad that enjoy equality of treatment under a treaty, providing there is the same disclosure (or commitment to disclose) of information as mentioned in the bullet point above.

Please note: the tax rates, thresholds and ceilings mentioned above follow the 2021 numbers. All the rules above are subject to applicable international tax treaties, if any.

Spouses and members of a civil partnership are fully exempted from inheritance tax. They remain, however, subject to gift tax according to a progressive tax bracket system. A rebate of EUR80,000 applies between spouses and EUR100,000 between children, every 15 years. See 1.1 Tax Regimes (Inheritance Tax and Gift Tax) for further details.

A 75% rebate is applicable to the gift/inheritance tax value of business assets and shares of entities’ qualifying business assets assuming that shareholders signed an agreement to maintain the control and participations among them over a period of at least six years.

Interestingly enough, gift and inheritance tax can be paid by remitting pieces of art to the Ministry of Culture, under the control and subject to the approval of the Ministry of Finance.

Different planning tools apply to financial profits such as dividends, interest and capital gains. They are all subject to a flat tax of 30%.

Subject to conditions, taxable capital gains can be reduced by rebates of between 50% and 65% where the taxpayer own the shares and participations sold for a period of two to eight years, or more.

The same rebates apply when a business founder sells their participation on the occasion of their retirement if the participation/share has been owned for a period of one to four years and can be increased to 85% when it has been owned for eight years.

Non-residents of France realising gains on real estate are subject to the same tax regime as residents of France, unless they reside in an EU member state and can prove that they are subject to a security system in their home country. In this case, their tax rate is limited to 19%, as opposed to 36.2%

In practice, there are no specific structures offering capital gain tax planning, considering the current legislation. Specific holding structures, such as civil partnerships or equivalent structures, are generally registered in consideration of estate planning needs, the applicable tax treaties and the citizenship(s) and/or the state of residence of non-French purchasers, depending on the property use (ie, whether it will be rented).

Recent financial and economic crises have resulted in more stringent taxation regimes. Conversely, the 2020 and 2021 health crisis has not impacted the French tax system, the French government being protective of French taxpayers in this difficult period. Besides, specific reductions and rebates have been voted in July 2020 (see below). Anticipated transfers of business and family assets have always been, and still are, highly encouraged. The French tax system remains very protective of familial and dynastic assets.

France participates actively in committees and councils at the OECD level and especially in the Task Force on Tax and Development. The French Ministry of Finances has also actively negotiated, especially during the past ten years, with other jurisdictions to modify its tax-treaty network in order to extend its tax audit capacity and protect its tax base.

The signing of Tax Information Exchange Agreements (TIAEs) with offshore jurisdictions and other mutual agreements, such as those relating to the US Foreign Account Tax Compliance Act (FATCA), have given the French government the opportunity to investigate international structures and discover practices that mitigate tax bases. Several internal rules and tax regimes have consequently been adjusted to improve the legal environment for collecting taxes fairly and effectively.

In parallel, the French tax authorities have been vested with wide-ranging investigative powers that include audits and investigations of private and confidential information from banks, accountants, family offices, notaries, etc. The statute-barred limitation period has also been extended to six or even ten years, when foreign assets or vehicles are concerned.

On the DAC 6 front, the EU Council revised, on 24 June 2020, the 2018/822 MDR Directive (DAC 6) imposing reporting obligations on intermediaries or taxpayers, within a period of 30 days, of cross-border arrangements. That provision grants to EU member states several extensions. The period 25 June 2018 to 30 June 2020 has been already reported to the end of 2021. Another extension could be decided depending on the evolution and implications of the COVID-19 pandemic.

A recent decision of the French Supreme Court, rendered in June 2021, provided that the above-mentioned rules cannot impose an obligation on lawyers to disclose confidential information and documents relating to their clients to the tax authorities.

The French civil law system has protected family members and family wealth for centuries.

The transfer of assets through generations can be structured so that tax erosion is mitigated and, thus, the family interest protected. There is also a real trend for more family governance and shareholders’ agreements, which provide protection from family disputes and result in business/family asset protection.

Thanks to EU legislation, a substantial network of tax treaties and internal rules, families and entrepreneurs enjoy some flexibility for transferring their wealth to younger generations, as cross-border issues can be anticipated and transfer and succession planning properly organised.

Since the implementation of the European Succession Regulation, the objective of which is to avoid the fragmentation of successions and enable people living in or investing in multiple jurisdictions to organise their succession in advance, estate planning, wills and international successions involving family members or assets can be dealt with using foreign laws.

France has a civil law system which provides forced heirship rules and limits testamentary freedom. If French succession law applies, then the issue of the deceased and, in the absence of descendants, certain close relatives enjoy special protection so that they receive a minimum portion of the succession. This depends on the number of children: if there is one child, the reserved portion is one half, if two children then it is two thirds, and if three or more children then it is three quarters. When a child dies, the same rules apply per stirpes.

As mentioned in 2.2 International Planning, in an international context, Regulation (EU) No 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European certificate of succession has applied since 17 August 2015 and offers testators the option of adopting the law of their nationality, which therefore allows the right to circumvent French succession law and therefore heirship rules. However, a recent reform, codified in the civil code, Article 913, provides that a French national or resident as well as a citizen or resident of a EU member state may claim their reserved portion over French assets and properties situated in France when they have been deprived of it according to legislation that does not provide forced heirship rights to the benefit of direct descendants. Such reserved portion is assessed on the value of the worldwide assets of the estate but applied on French assets only. Besides, a recent court decision has ruled that when it is demonstrated that a trust has been settled in order to circumvent the forced heirship rules and, thus, deprive heirs of their legal rights, the French judges can authorise these heirs to claim their legal inheritance rights as if the trust was transparent, the latter qualifying as a sham trust (Cass. 1e civ. 18-5-2022 n° 20-20.609 FS-D).

Pursuant to the Hague Convention dated 14 March 1978, couples may choose the law applicable to their matrimonial regime, provided one spouse has sufficient connecting factors with the chosen law (based on nationality, habitual residence or whether it is the first state in which they will reside after marriage).

In France, matrimonial law is predominantly governed by the Civil Code. The rules relating to matrimonial property and contracts are contained in Articles 1393 to 1581.

The default matrimonial regime under French law is the community property regime (legal regime), which provides that assets acquired during the marriage (savings from gains and salaries, assets acquired with gains and salaries, proceeds and income from personal assets and assets acquired in using them) qualify as “joint assets”.

The community of movables and acquired assets or the universal community property regime are also options for spouses residing in France or marrying under French law.

In practice, the separation of property regime (Articles 1536 et seq Civil code) is the one which offers the best protection to the spouses as regards their personal assets. It is often used and recommended in the case of an international nuptial agreement with a significant discrepancy between the parties.

Assuming that all transfers of assets – by sale, through lifetime gift or by reason of death – must be registered and declared to the fair market value of the property transferred, the transfer of property itself implies the adjustment of the cost basis of the property and, thus, of the corresponding tax charge.

French residents generally opt to own their wealth directly or through a civil law company, and use life insurance products. These vehicles do not, however, offer full tax exemption, except when the transfer is made to the benefit of a surviving spouse, civil partner or a philanthropic body.

As regards family business assets, ascendants frequently transfer the bare ownership right to their children or grandchildren and keep the usufruct (life interest). Gift tax is due upon transfer of such a bare ownership right, but on a limited basis, the value of that right being assessed in consideration of the age of the donor/usufructor at the date of the gift. The advantage of such planning is that it significantly reduces the global tax burden, considering that the usufruct re-joins the bare ownership right tax-free. The same legal mechanism could be used for real estate, held outright or through an entity, the division of the property right being organised in that case at the entity level.

A specific regime was codified at the beginning of the 20th century in order to help facilitate the transfer of family companies and groups to younger generations. This regime provides an exemption of 75% of the value of the shares transferred, assuming that the shareholders/family members make a commitment to keep their stake in the entity for at least two years collectively plus four years individually and that one party to the engagement is involved in the business during that period. This period of six years is supposed to preserve stability among the shareholders and protect the family investments.

An additional reduction of 50% can apply if the transfer of the family business is made through a lifetime gift before the 70th birthday of the donor.

In practice, combining the above-mentioned planning opportunities reduces the gift/inheritance tax due upon transfer of a family business to 10%.

French legislation does not yet provide specific rules relating to the transfer by reason of death of digital assets. Discussions are pending and reforms will certainly be submitted to Parliamentary vote in the coming months.

Associations, foundations and similar charities are mostly used by high net worth individuals and/or individuals who have no issue, or who wish to gratify specific philanthropic vehicles.

Donations to entities other than individuals can only be made to the following eligible beneficiaries.

• The state or subdivisions of the state (départements, communes), public establishments (établissements publics).
• Public-utility establishments (établissements d’intérêt public), namely offshoots of the government or its subdivisions, governed by public law – these entities are characterised by the fact that:
1. their objective is to benefit the general public (or certain segments of the general public); and
2. they do not act for a profit.
• Religious societies (associations but not sects) and certain federations of family societies.
• Societies (associations) and foundations subject to recognition of their public-utility nature (PUR) by government decree (décret) passed after advice is received by the Council of State (Conseil d’Etat) – public-utility status may be granted to foreign charitable organisations whose activities take place in France.
• “Simple” societies – since these have neither PUR nor ACSM (see below) status, their capacity to receive is restricted to so-called hand-to-hand gifts (dons manuels), grants from the state and its subdivisions and gifts from PURs.
• Societies with objects that are exclusively limited to assistance, charity (bienfaisance), scientific or medical research (ACSMs).

The rules for recognition of ACSM status should be set in a government decree. Until it is published, the application needs to be made to the prefect of the department wherein the society has its seat. The process for securing ACSM status is less burdensome and quicker than that for PUR status, if only because there is no need for a Council of State decree. One consequence of this is that societies that fall into the above category and wish to receive gifts and bequests by testament usually do not apply for PUR status, except sometimes to strengthen their image vis-à-vis the general public.

France does not have a trust law of its own. It signed, but did not ratify, the 1985 Hague Convention on the Recognition of Trusts. France has, however, recognised foreign trusts under its own private international law. Besides, for several years, French tax legislation has referred directly to trusts and similar vehicles, namely: Article 120.9, Article 123 bis and Article 990 D of the Tax Code. The Revised Finance Bill for 2011, which is the most recent and substantial reform of trust law, has introduced transparency rules for tax purposes (see 3.3 Tax Considerations: Fiduciary or Beneficiary Designation).

In the past, trusts were opaque for wealth tax and inheritance tax purposes and only distributions of income were treated as taxable distributions.

Since July 2011, trusts have been deemed transparent for wealth tax, inheritance tax and gift-tax purposes, and substantial disclosure obligations have been imposed on trustees.

The use of a trust has therefore become more limited and alternative planning must be considered.

In those cases where a trust is settled by a French resident, a French resident is the beneficiary of a trust, and/or the trust fund contains French-situs assets or a trustee resides in France, the following rules will need to be taken into consideration.

Income Tax

Distributions of income will be treated as distributions of current income. A recent court decision rendered by the Paris Court of appeal (CAA Paris 21/04/2023) has clarified the tax treatment applicable to income, capitalised income versus principal of the trust.

Gift and Inheritance Tax

Trusts will be deemed transparent for gift and inheritance tax purposes. If the beneficiaries are identified individually, the relevant standard gift, that is, inheritance tax rate will apply. If they cannot be so identified but are all in the line of descent, the tax rate will be 45%. Otherwise, the tax will be levied at a rate of 60%. This last rate will apply in all circumstances if the settlor was a French resident at the time the settlement was made. Lastly, it would seem that the above rules will apply to each successive generation of beneficiaries.

Wealth Tax/Levy

The assets in trust are includible in the settlor’s taxable wealth if the settlor is a resident of France or to the extent that the trustees own French-situs properties. If the tax cannot be levied at the settlor’s level, wealth tax may be payable by the trustees or the French-resident beneficiaries, at a rate of 0.5% before 2013 and 1.5% since then. The settlor and the so-called informed beneficiaries will be jointly liable with the trustee for the payment of the tax.

Disclosure Obligations

The settlor, trustees or informed beneficiaries (when any of these is a French resident or French-situs assets are involved) are subject to specific disclosure obligations pertaining to the settlement of the trust, trust deed modifications, termination of the trust and characteristics of the trust. Failure to disclose will make the settlor, trustee and informed beneficiaries jointly liable to a tax penalty. Until March 2017 this was assessed on the value of the assets in trust including capitalised income but, after a Supreme Court decision stating that the former penalty regime was unconstitutional, it now amounts to EUR20,000.

Given that France has no proper trust law, the focus has been mainly on foundations and other philanthropic bodies. In the past, charitable giving was subject to very tight government control, but those constraints have finally been liberalised, notably through the introduction of a new vehicle, the endowment fund (fonds de dotation) alongside the traditional foundations and societies. This, combined with significant improvements on the tax side, explain in part the current renaissance of charitable giving in France.

Charities now constitute a major economic sector, whereas state bodies and their subdivisions have fewer and fewer resources to cover public needs in areas that can be financed through private funding.

The EU-wide recognition of the necessity of a strong not-for-profit sector in Europe also militates for a free environment as regards international giving.

Wealth planning mainly depends on the state of residence of the owner and on applicable regulations and tax treaties, if any. French residents generally opt for direct holding of their assets or a civil partnership and are keen on life insurance products. Business assets are more frequently owned through corporations. Trusts and family foundations have been used by individuals and families in recent decades, but the new European and French reporting obligations have limited that trend.

Under the Civil Code, an individual interested in estate planning can ask for an heir’s consent to waive irrevocably the right to challenge violations of their “reserved portion”, the advantage being not to dilute the shareholding of the family business and, thus, the control of a family business. This can be done by written deed in the presence of two French notaries. The heir(s) excluded from the family business could receive other family assets.

Entrusting management and control over succession assets to a specific heir, the surviving spouse or a third party for a limited time is also a good planning opportunity.

This is known as the “power of attorney with posthumous effect”, which survives the death of the principal. Under such a power of attorney, the principal can entrust the management of certain designated assets to any person, including a legal entity, for a limited duration (two or five years, renewable by court order).

The power of attorney must be very precise in its description of the agent’s powers and must designate the heir or heirs with respect to whom the document is written.

Using “gradual” and “residual” gifts and bequests is also a planning opportunity for asset protection, the lifetime gift or bequest being in this case subject to the conditions that:

• the transferee on their death leaves whatever remains of the gift or bequest to a named third party (residual gift or bequest); or
• the transferee keeps the gift or bequest during their lifetime and leaves it to a named third party on their death.

The tax system applicable to gradual and residual gifts and bequests is complex but also very attractive.

The fair market value of an interest in an entity can be reduced to a certain extent (approximately 10-20%) when binding shareholders’ agreements are signed providing pre-emption rights and/or limitations for selling the shares, as well as for non-voting shares or minority participations.

Wealth disputes relating to family assets and/or involving trusts, foundations or similar family entities are more and more frequently settled out of court by means of a conciliation or mediation process, with the support of a neutral third person, conciliator, mediator or judicial entity, named by the judge, with the consent of the parties.

Arbitration is also an option frequently adopted by the parties. It is prohibited in family law by Article 2060 of the French civil code, but it could be used in inheritance cases.

In general, financial compensation is granted to the party/parties who have justified their injury/damage.

Heirs who consider themselves to have been deprived, partly or fully, of their inheritance rights may make claims against the other heirs or legatees for reinstating equality amongst them, as French legislation provides for claw-back rules (rapport/reduction).

Fiduciary powers cannot be recognised under French law, except in the specific situations of estate liquidation process, bankruptcy and defeasance.

Fiduciary liabilities are not regulated in France, except in the specific situations of bankruptcy and defeasance.

Fiduciary regulation refers to commercial or defeasance issues in France.

Fiduciary regulation refers to commercial or defeasance issues in France.

Domicile and residence concepts are used mainly for tax purposes (see 1. Tax) or as regards the application or competence of a piece of legislation/jurisdiction, and refer to the presence of an individual or family.

Citizenship requires fulfilment of several conditions referring to filiation.

Attribution of French Nationality Due to Filiation (Jus Sanguinis)

One can generally acquire French nationality at birth. In this case, the attribution of French nationality is on condition of the French nationality of one of the parents and the person shall be deemed to have been French as from the date of their birth, even if the statutory requirements for the issuance of French nationality were fulfilled only at a later date.

The interested party has to prove their nationality. For this reason, when a child of a French parent is born abroad, it is essential for that French parent to record the birth of the child in the French civil register.

In order to prove their nationality, the interested party must ask for a certificate. The French Nationality Office in Paris has jurisdiction over persons residing abroad.

Attribution of French Nationality by Birth in France (Jus Soli)

If other requirements (such as residence in France) are also met, a child born in France (including overseas territories) to at least one parent who was also born in France automatically acquires French citizenship at birth (double jus soli).

A child born in France to foreign parents may also acquire French citizenship. Any child born in France from foreign parents acquires French nationality when they turn 18 years of age, provided that at this date they reside in France and have been habitually resident in France for an interrupted or uninterrupted period of at least five years since the age of 11.

Acquisition of French Nationality by Naturalisation

Finally, foreign-born persons residing in France may request to be naturalised if they have resided continuously in France for five years prior to the filing of the request. This procedure has not been impacted by the COVID-19 crisis.

The concept of “residence” represents the place where the person has established, on a fixed basis, their permanent or habitual centre of interests.

It is required that the applicant has their primary source of income in France during the five-year residency period. This five-year residency period may be:

• reduced to two years if the foreign-born person successfully performed two years of higher education in France; or
• completely waived for citizens of countries where French is one of the official languages, or if French is their mother tongue, or if they have spent at least five years in a school/in education in which French is spoken.

Naturalisation will only be successful for those who are judged to have integrated into French society (ie, by virtue of language skills and understanding of the rights and responsibilities of a French citizen, to be demonstrated during an interview at the local prefecture), and who show loyalty to French institutions.

This request is made at the prefecture where the foreign-born person resides.

In some circumstances, and notably when a person is in a distressed situation or has displayed heroic behaviour, they may obtain French citizenship by decision of the President or Prime Minister. This is a confidential procedure and definitely not standard.

Life insurance contracts or public funding are generally used for covering the living costs of minors or adults with disabilities.

Supervision can be undertaken either by family members who are deciding jointly within a specific conciliatory procedure (conseil de famille) and/or a judge deciding protective measures for the incapacitated individuals.

France has a long tradition of protection for persons who need special care and attention, and public coverage is provided for the elderly.

When descendants assist their parents financially, which is a legal obligation provided for by the French Civil Code, pensions and financial support are deductible for tax purposes.

Younger generations can also save a share of their income during their business life to secure their way of living after retirement.

Funds invested in the public pension regime and private pension funds are income tax-deductible, which incentivises preparation for the period following retirement.

Adopted children or those born out of wedlock have the full right to inherit from their parents, even if they were born in an “illegitimate” relationship to one of the two parents.

From a legal viewpoint, France has recognised same-sex couples since November 1999. Article 515-1 of the Civil Code provides a definition of a civil partnership: “a civil covenant of solidarity is a contract entered into by two adult natural persons (aged of 18 years old or more), of different sexes or same sex, to organise their common life”. All parties who conclude a PACS as from 1 January 2007 are treated as spouses married under a separation of assets regime (Law 23 June 2006). If they opt for a limited community regime, which is closed to the French legal regime, the matrimonial home is considered as a joint asset.

In April 2013, the French Parliament adopted a law on same-sex marriage, the aim of which was to extend the institution of marriage to homosexual couples and allow the adoption of children by a homosexual married couple.

The law also provides a rule on the conflict of spouses’ respective national laws. It states that if the national law of one spouse prohibits same-sex marriage but the national law of the other spouse or their domicile or residence authorises it, the French authorities are able to recognise the marriage.

Article 515-8 of the Civil Code defines a domestic partnership (concubinage) as a union characterised by the joint life of two persons, of different sexes or of the same sex, who live together as a couple in a manner characterised by stability and continuity. Assets purchased, inherited or received through gifts are regarded as the personal assets of one partner. In practice, unmarried couples enjoy no protection and acquire no right from their cohabitation, even when it is very long.

Case law states that property rights over the family home are determined only by reference to standard property law, which means that a cohabitant who has not acquired, received or inherited a family house possesses no right to the property acquired, received through lifetime gift or inherited.

In practice, claims relating to social coverage, pensions, damages or compensation are rejected by French courts.

Tax-deduction benefits have recently become significantly more attractive. Deductibility of gifts is dependent on whether the beneficiary of the gift is eligible or not under the relevant section of the revenue code. A distinction needs to be made between gifts made by individuals and those made by business enterprises.

Fonds de Dotation

The concept of fonds de dotation (endowment funds) has been introduced into French law under Law No 2008–776 of 4 August 2008. Unlike foundations, endowment funds are quick and easy to establish, by way of a simple declaration to the prefecture in the area where the fund is to be established. The process of giving to a fund is subject to minimal rules. Endowment funds enjoy legal personality. As regards management, the only requirement is that a fund should have a board made up of a minimum of three persons.

Donors making gifts to a fund enjoy an income tax rebate equal to 66% of the donation, up to a ceiling of 20% of the taxable income; if the donor is a juridical entity, the rebate is 60%, up to a ceiling of 0.5% of its turnover. Gifts to a fund are exempt from registration tax.

Lastly, an endowment fund enjoys the general tax regime that applies to non-profit-making organisations.

Deductibility

Deductibility of gifts at the donor’s level is dependent on whether the beneficiary of the gift is eligible or not under recognition of their public utility or not-for-profit status. A distinction needs to be made between gifts made by individuals and those made by business enterprises.

As regards international giving, French domestic law provides for very limited flexibility in terms of permitting tax-deductible gifts from a French tax resident to a foreign philanthropic body, except (rarely) when a treaty provides for more favourable rules, such as the US-France gift tax treaty.

However, since a decision rendered by the European Union Court of Justice in 2009 (C318/07 Hein Persche), international giving within the EU has been greatly facilitated. Under this case law, a donor who is a tax resident of an EU member state should enjoy the same tax benefits in that member state, irrespective of whether they give to a philanthropic body in that member state or in another.

French tax legislation has been consequently modified to facilitate intra-EU giving.

Please refer to 10.1 Charitable Giving.