Inheritance declarations must be filed within the usual deadlines
As a reminder, when an estate is taxable in France and the deceased died on French soil, the inheritance declaration must be filed with the registration services within six months of the death, even if the deceased had his/her usual residence abroad. However, if the deceased died outside France, the filing deadline is one year, even if he/she was a French resident.
To be admissible, in principle filing of the declaration must be accompanied by payment of the entire inheritance tax.
Even without lockdown, the six-month filing deadline is very difficult to meet. This is because preparing an inheritance declaration requires having all the information about the deceased's family situation, the terms of the will and his/her assets and liabilities on the date of death. Yet valuing the deceased’s assets, as well as liquidating their matrimonial regime and their estate, can prove complex. In addition to these technical difficulties, various factors can delay preparation of the inheritance declaration, such as the minority of a party, the international dimension of the inheritance due to the deceased's assets located abroad or even non-resident heirs or legatees…
In addition to the usual difficulties, from March 2020 major obstacles presented themselves as a result of lockdown:
- notarial firms had to close their doors and firms took varying lengths of time to adopt teleworking;
- legal professionals are having great difficulty in assembling the information required to identify and assess the assets and liabilities of the estate.
This means that the heirs and legatees have lost precious time for compliance with the filing deadlines.
However, the ordinances concerning the health emergency did not provide for any deadline extension. This lack of extension was justified, in the report to the French President relating to Ordinance no. 2020-306 of 25 March 2020, by the need to preserve public revenues: “This aim is to preserve the recovery of public revenues necessary for the functioning of public services and to support the economy.”
Inheritance declarations must therefore be filed within the usual deadlines.
We will recall the penalties incurred in the event of delay:
- a 5% penalty for late payment;
- a 10% penalty for failure to declare, increased to 40% if the declaration is not filed within 90 days of receipt of a formal notice to declare, and even to 80% in certain specific cases. The authorities can also implement an automatic taxation procedure if the necessary conditions are met.
Late-payment interest is also applicable to these penalties. For declarations to be filed within six months of the death, late-payment penalties apply from the first day of the seventh month following the death.
The precautionary measure involves making a down-payment within the filing deadline
It is more important than ever for the precautionary measure, involving paying a down-payment on inheritance tax duties, to be implemented if, as may be feared, taxpayers are unable to file a declaration due to lockdown: either because the filing deadline expires during lockdown or because it expires subsequently but a significant delay has built up in preparing the declaration during that period.
Payment of a down-payment within six months of death will prevent payment of late interest and application of the 5% penalty, up to the amount of the down-payment.
In addition, if the inheritance declaration is filed within one year of death, accompanied by the payment of all fees due, no penalty will be due for late payment (5%) or for failure to declare (10%). Only late-payment interest will need to be paid, but only up to the difference between the total inheritance tax due and the amount of the down-payment paid on time.
If it is not possible to file the declaration, professionals must therefore try to estimate the amount of the down-payment required as closely as possible based on the information in their possession, within the limit of the cash which can be released of course.
Although making a down-payment does not theoretically require the filing of a final declaration, it is nevertheless recommended to contact the tax authorities to inform them of the delay and provide explanations (in the form of an email, given the circumstances).
The same applies in the event that no down-payment can be paid due to a lack of cash.
Although it would be hoped, given the exceptional circumstances due to the health crisis, that the tax authorities would be more willing to grant at least a partial reduction in late-payment interest, and even in penalties when they are due, the granting of reductions is discretionary rather than automatic. It is therefore important to be proactive and explain any delay in writing, before subsequently submitting a request for a discretionary reduction.
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