In our context of increasing international mobility of individuals and assets, bilateral tax treaties constitute an essential instrument of cooperation between States, designed to prevent situations of double taxation. These agreements aim to determine the rules of taxation applicable to taxpayers who may be subject to tax in multiple jurisdictions. In addition to the treaty on income and corporate tax, Franco-British relations benefit from a rather rare type of tax treaty, which applies specifically to inheritance.
International inheritance taxation presents a singular complexity, especially when an estate is formed of assets located in several countries. These situations, although quite common in practice, are quite technical, given the differences between the domestic laws of the two States, particularly regarding civil rules or the criteria for tax domicile.
It is to solve such situations that the agreement between France and the United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation with respect to taxes on estates of 21 June 1963 (hereinafter the “Convention”) was signed. It efficiently allocates the powers to tax between the two States and prevents double taxation of cross-border estates where a deceased person is potentially considered as having their last domicile in both States, or where the estate consists of assets on both sides of the Channel.
The Franco-British Treaty is one of the internationa instruments that Citizen Avocats uses and interprets the most, in its daily practice. We summarize here its main provisions for you.
We naturally remind our readers that each situation must be considered on a case-by-case basis, notably through personalized legal advice.
1°) Application of the Treaty
Entered into force on 30 June 1964, the Convention applies to Franco-British estates.
From a substantive perspective, it applies, in France, to droits de mutation à titre gratuit levied on hereditary shares and, in the United Kingdom, to tax on the estate as a whole (initially referred to as Estate Duty and now replaced by Inheritance Tax). Other taxes or ancillary duty are excluded. Therefore, gift taxes remain governed by French domestic law, in particular Article 750 ter of the French Tax Code.
From a territorial perspective, the Convention applies in metropolitan France and the overseas departments (eg Guadeloupe, French Guiana, Martinique and Réunion) and, in the United Kingdom, to Great Britain and Northern Ireland, Great Britain comprising England, Wales and Scotland, to the exclusion, however, of the Channel Islands and the Isle of Man.
2) Concept of domicile
The Convention applies when the deceased is domiciled in one of the States. Domicile, as defined in the Convention, is an autonomous concept, distinct from both nationality and civil residence.
The Convention establishes a two-step mechanism to determine domicile. First, each State applies its domestic rules to determine whether the deceased is considered having its last domicile in its territory. Second, if this analysis leads to dual domicile, the treaty provides hierarchical tie-breaker criteria to identify a single tax domicile.
These alternative criteria, in order of priority, are the following:
- Permanent home (if there are two, the one with which personal and economic relations are closest);
- Habitual place of residence;
- Nationality; or
- Failing the above, a decision taken by mutual agreement between the tax authorities.
3°) Consequences of domicile
Pursuant to Article 5 of the Convention, when the deceased is considered domiciled in one of the Contracting States, that State is by default competent to tax the entire estate. It is therefore the domicile of the deceased (as defined above) which is the determining criterion for the allocation of tax jurisdiction (not the tax residence of the heirs or beneficiaries for example).
The other State retains a limited taxing right over the sole assets located within its territory, as defined by the Convention.
4°) Avoidance of double taxation
The Conventionprovides a tax credit mechanism to prevent double taxation (Article 6). The State competent to tax the global estate must credit its own tax with the amount paid to the other State for assets located there:
- This credit is applied asset by asset, up to the amount of tax that would have been due on that asset in the domicile State;
- It takes the form of a tax credit, but it does not give rise to a refund if the foreign tax exceeds the theoretical tax due in the domicile State; and
- Regarding liabilities, only debt specifically attributable to an asset located outside the domicile State may be credited in the State where the asset is taxable.
5°) Determination of the place of taxation of assets
“Conflicts” of legal determination or location may arise between States, notably due to different classifications under their respective domestic laws. Article 4 of the Convention specifically determines the place of taxation for transferred assets.
The general principle is taxation in the State of domicile of the deceased, subject to exceptions, notably for real estate and for assets connected to a permanent establishment or fixed base.
| Type of asset | Place of taxation |
| Real estate | State of location (immovable status assessed under local law) |
| Shares in SCIs | State of location of the real estate held by the company (for civil real estate companies: location of the assets managed in accordance with the corporate purpose) |
| Furniture | Location at date of death or destination if transfer is in progress |
| Art and collections | Location at date of death or destination if transfer is in progress |
| Jewelry / Gold | Location at date of death or destination if transfer is in progress |
| Automobiles | Location at date of death or destination if transfer is in progress |
| Livestock | Location at date of death or destination if transfer is in progress |
| Cash | Location at date of death or destination if transfer is in progress |
| Ships / Aircraft | Registration place |
| Bank accounts / Savings in France | Location of domicile at death (per Treaty) |
| Life insurance / Bonds | Warning. Please note that the applicable law is quite uncertain for such asset, as France has adopted a rather questionable position, considering that capital paid under a life insurance policy is not covered by the Convention, notwithstanding Article 4(f) thereof. Please consult us on this subject, as it can prove very technical |
| Mutual funds / SICAV / Listed shares | Location of incorporation of the company |
| Insurance payouts | Location of domicile at death (per Treaty) |
| Business goodwill | Location of business, fund, or professional practice |
| Intellectual property | Location of domicile at death (per Treaty) |
| Claims from torts or quasi-torts | Location of domicile at death (per Treaty) |
| Judicially recognized claims | Location of domicile at death (per Treaty) |
When succession is organised by means of a testamentary trust (which is very often the case in the UK), certain additional complexities must be addressed. It is nevertheless well established that the Convention also applies to these specific types of succession involving a foreign trust.
6°) Example – UK Resident with Assets in France
A British national, tax resident in the United Kingdom, with a last domicile in London, had one child.
At his death, he leaves the following estate:
- Apartment in Paris: 600,000 €;
- Primary residence in the UK: 500,000 £; and
- UK bank accounts: 120,000 £.
- UK Taxation
As the State of tax domicile, the UK taxes the entire estate under its own Inheritance Tax.
- Total estate (converted to €): ≈ 1,313,000 €
- Nil-rate band: 325,000 £ ≈ 374,000 €
- Taxable base: ≈ 939,000 €
- Tax rate: 40 %
Theoretical UK tax: ≈ 375,600 €, including the Paris apartment.
- French Taxation
France, under the Treaty, is only competent to tax the real estate located in France.
Taxable base: 600,000 €
Inheritance tax in France:
- Child’s share: 600,000 €
- Exemption applicable in direct line: 100,000 €
- Taxable amount: 500,000 €
- Tax due (progressive French scale): ≈ 100,000 €
- Avoidance of Double Taxation
The Treaty provides a credit mechanism:
- Tax paid in France: 100,000 €
- This amount is credited against the UK Inheritance Tax due for the French asset.
- Final outcome for the heir
- 100,000 € in France (tax on French assets)
- ≈ 275,600 € in the UK (after credit applied)
Total tax across both countries: ≈ 375,600 € (instead of 475,600 €)
This very simplified example (the situations considered by our firm are generally much more complex) illustrates the complexity of cross-border Franco-British inheritances, from determining the competent taxing State to applying mechanisms to prevent double taxation.
Regularly advising clients on Franco-British tax issues, we work in close collaboration with the English law firm SO Legal Ltd to secure and optimize cross-border taxation.
Article co-authored by Simon Deceuninck, Partner, and Auriane Fayet, Trainee lawyer, January 2026.