Inheritance and gift tax in St. Barths: what do heirs actually pay?

St. Barths levies no inheritance tax on assets that fall under its tax rules. Gifts are taxed locally only when they involve real estate on the island or shares in a company that owns it. France, however, still taxes wherever a link to France exists, in particular when the heir lives there.

Is there inheritance tax in St. Barths?

Under article 86 of the St. Barths Tax Code, local rules cover:

• all assets of the deceased, wherever located, if they were a St. Barths tax resident, which takes at least five years;
• assets located on the island, if the deceased was not a St. Barths tax resident;
• in that second case, all assets received by an heir who has been a tax resident of the island for five of the past ten years.

These assets are exempt from any local tax (article 89). For the rest of the local tax system, see the taxes that apply in St. Barths.

An estate return is still mandatory (article 88): within six months of a death that occurs on the island, or twelve months if an island tax resident dies elsewhere. It lists all assets at market value, on the filer’s responsibility. That value later serves as the reference for capital gains on a resale.

Which gifts are taxed in St. Barths?

Only gifts of real estate located on the island, and of shares in companies that own such real estate, are taxed locally (see holding property through a company). A gift of cash, personal property or shares in a company with no real estate is outside the local scope. It may still be taxable in France, depending on where the donor or the recipient is resident.

Allowances (article 96)

Recipient	Allowance
Spouse or civil union (PACS) partner	€80,000
Direct ascendant or descendant, such as a parent or child	€150,000 each
Brother or sister	€60,000 each
All other cases	€1,500

The allowance applies once per six-year period starting from the gift, and gifts made between the same people within the previous six years are added back.

Rates (article 97)

Relationship to the donor	Rate	With a ten-year commitment
Spouse, descendants, ascendants, collateral relatives up to the 3rd degree	25%	0%
Collateral relatives of the 4th degree	25%	4.80%
Relatives beyond the 4th degree	25%	25%
Unrelated persons	40%	40%

The commitment is made in the deed: the recipient undertakes not to sell the asset for ten years. For shares in a company that owns real estate, it extends to the real estate held by that company.

If the commitment is broken, the gift tax from the original deed becomes payable at the time of the sale, even a partial one, plus a penalty of 0.75% per month, compounded, on that tax for the months remaining. No penalty applies if the asset is sold to the Collectivity, the island’s government.

A civil union (PACS) partner qualifies for the €80,000 allowance and falls under the 25% rate. Whether the reduced rate is available to them should be confirmed with the notary before the deed is signed.

A gift of real estate requires a deed drawn up by a notary (a public legal officer), and the tax is paid on registration. Trusts are treated as gifts between unrelated persons, with some exceptions.

When does France tax an inheritance or a gift?

The local exemption does not bind France, which taxes an inheritance or a gift in three situations:

• the deceased or the donor is a French tax resident: all of their assets are covered;
• the asset is located in France;
• the heir or recipient is a French tax resident on the date of the transfer and has been for at least six of the ten preceding years: everything they receive is covered.

Here, “France” means mainland France and its overseas departments, not St. Barths. But anyone who has lived on the island for less than five years is still treated as a French tax resident: see the five-year rule.

For the estate of someone who has been a St. Barths tax resident for more than five years, this gives:

Situation	St. Barths	France
Heir not a French tax resident, assets outside France	Exempt	Nothing
Heir a French tax resident (six years out of ten)	Exempt	Tax on everything they receive
Asset located in France	Exempt	Tax on that asset

If the deceased had lived on the island for less than five years, France taxes all of their assets.

Between parent and child, French tax is calculated after a €100,000 allowance, on a sliding scale from 5% to 45%. See also what France still taxes.

Usufruct and civil law

For an heir resident in France, article 751 of the French General Tax Code presumes that assets in which the deceased held the usufruct (the right to use an asset and collect its income) and the heir the bare ownership belong in full to the estate, unless proven otherwise. The end of a usufruct, by contrast, triggers no tax, locally or in France.

Civil law also remains national: French forced heirship rules, which reserve part of an estate for the children, apply in St. Barths. A person with two children can freely dispose of only one third of their assets.

Example: one child on the island, another in France

Take Hélène, a St. Barths tax resident for more than five years. She has two children: Camille, who has always lived on the island, and Thomas, who has lived in Lyon for ten years. All of her assets are on the island. This is a simplified example, for illustration only.

Hélène gives Camille a plot of land valued at €1,000,000. No gift has been made between them in the past six years.

1. Parent-child allowance: €1,000,000 - €150,000 = €850,000 taxable.
2. Without a holding commitment: €850,000 × 25% = €212,500 in gift tax.
3. With the commitment not to sell for ten years: €850,000 × 0% = €0.
4. On the French side: nothing, because neither Hélène nor Camille is a French tax resident and the land is not in France.

If Camille sells the land within ten years, the gift tax from the original deed becomes payable, along with the penalty.

When Hélène dies, each child receives €800,000 of assets.

• Camille pays nothing: the local exemption applies, and there is no link to France.
• Thomas pays nothing in St. Barths, but he is taxed in France on €800,000 - €100,000 = €700,000, on the sliding scale from 5% to 45%.

The same estate therefore costs each child a different amount, depending on where they live.

Inheritance and gift tax: common mistakes

• Assuming the local exemption protects an heir who lives in France.
• Assuming you are exempt as soon as you move. Before five years, the estate remains French for tax purposes.
• Skipping the estate return because no tax is due.
• Gifting shares in a company that owns real estate assuming they are out of scope.
• Selling a gifted asset before the ten years are up.

Inheritance and gift tax: the bottom line

In St. Barths, inheritances and gifts are taxed differently: assets that fall under the island’s tax rules are exempt from any local tax when they pass by inheritance. An estate return is still mandatory, within six months of a death that occurs on the island. Only gifts of real estate located on the island, and of shares in companies that own such real estate, are taxed locally: the 25% rate drops to 0% for a spouse, descendants, ascendants and collateral relatives up to the third degree if the recipient commits not to sell the asset for ten years. France taxes an heir or gift recipient who has been a French tax resident for at least six of the past ten years, St. Barths assets included. A transfer is therefore best planned early, with an advisor and a notary.

A note for U.S. readers: this article covers French and St. Barths rules only. U.S. citizens and green card holders remain subject to U.S. tax on their worldwide income wherever they live.