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International heritage: what taxation system in the event of a divorce ?

Home > Inheritance and succession | Published 2020-02-12

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Divorces are increasingly taking place on an international scale. Have you acquired real estate and/or movable property abroad during your lifetime together? Do you wonder how your divorce will affect your estate? A divorce can be difficult not only for the spouses but also for the children. An international heritage can complicate the division of property during a divorce. The assistance of an experienced family law attorney at the international level is a necessary asset to guide you through this complex process. Avocats Picovschi, located in ¨Paris, has an entire department experienced in these types of issues since 30 years.

The choice of a law applicable to the matrimonial regime of marriages concluded before September 1st 1992

Since the entry into force of the Hague Convention of March 14th 1978, spouses in an international situation have the option of choosing the law that will apply to their matrimonial regime. This falls under the principle of autonomy of will, a principle that is almost omnipresent in matters of international divorce. However, this choice is limited to three laws which are:

  • The law of a country of which one of the spouses is a citizen at the time of the choice;
  •  The law of a country in which one of the spouses is a habitual resident at the time of the choice;
  • The law of the country in which one of the spouses will establish a new habitual residence after the marriage.

This law chosen by the spouses will apply to all of spouses’ assets regardless of their nature or location. Spouses who get married after September 1st 1992 may benefit from the provisions of the Hague Convention related to the property relations of the spouses. Ownership of real estate and/or movable property in a foreign country means that the spouses are involved in an international situation.
It is advised, for the sake of legal certainty, that spouses in international situations use a marriage contract in advance and choose the law applicable to their matrimonial regime. This will facilitate the fate of their property in the event of a divorce.

If the spouses have not chosen a law applicable to their matrimonial property regime, there are several hierarchical criteria for the applicable laws to consider:

1. The law of the country of the first habitual residence of the spouses after their marriage, regardless of the duration of the residence.
2. In the absence of a common residence, the common national law of the spouses will apply.
3. In the absence of a common nationality of the spouses, the law of the country with which the spouses have the closest ties shall apply.

Marriages contracted before September 1st 1992

Common international law will apply in the absence of international conventions governing the matrimonial regimes of spouses in international situations before September 1st 1992. According to the conflict rules of French law, spouses are free to choose the law applicable to their marriage contract. In the absence of a choice, an implicit choice of the parts of the law in which their first marital home is situated shall be presumed. According to case law, the spouses must have permanently fixed their marital home for at least two years in that country.

The law applicable to the matrimonial property regime will apply to all of the property and estate relationships of the couple not only throughout the marriage but also during the divorce.

The new European rules on assets

A new European Regulation on matrimonial property regimes, called the “RM Regulation”, aims to establish an enhanced cooperation in the field of international couples' property regimes. This will ensure greater legal certainty when the couple owns property of any kind abroad.

France is a participant in the RM regulation. The matrimonial regime, according to this regulation, deals with the property relations resulting from marriage but also from its dissolution.

The principle of autonomy of will also applies to the provisions of the RM Regulation. However, if the parties have not chosen an applicable law, the regulation has put in place 3 hierarchical criteria:

1. The law of the country of the first common habitual residence of the spouses after the celebration of the marriage; 

2. The law of the country of the common nationality of the spouses at the time of the marriage celebration (this criterion does not apply if the spouses have more than one common nationality at the time of the marriage celebration;

3. The law of the State with which the spouses have the closest ties at the time of the celebration of marriage.

Tax effects on the international assets in the event of divorce

Spouses with real estate assets of 1.3 million euros or more will be liable for the property tax (IFI) replacing the wealth solidarity tax (ISF) since January 2018.

When a couple is married, the tax is levied by tax household. If the property generates income for the couple, the couple will have to pay income tax. However, following a divorce, the imposition of the IFI will be done separately by each of the spouse on their own personal assets.

If a tax agreement has been signed between France and the country where one or more property belonging to the couple is located, this will allow them to avoid a double taxation on such property.

What to do in case of a real estate dispute ?

In the event of divorce, spouses are advised to have the division of property recognized in the country/countries where the property is located. In the case of real estate property, it is governed by the law of its geographical location.

If a dispute arises between the spouses with respect to real estate situated abroad, it will be up to the judge of the country where the property is located to settle the dispute.

Calling on an attorney in these types of situations is the best way to protect your rights. Avocats Picovschi, a law firm experienced in divorces and tax conflicts will be able to assist you throughout this difficult time.

This article is available online for public information purposes. It is updated regularly, as needed. Due to the constant evolution of the laws and the legal system, we cannot guarantee that the information in this article is still applicable. We invite you to contact us with any legal questions or concerns you have regarding this topic at +33 1 56 79 11 00. In no way can this firm be held liable for articles that contain inaccuracies or are now out of date.

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