An heir declares three properties in an estate opened in 2013. Three years later the French tax authority reassesses: in its view, the studio, the flat and the former maids’ rooms were declared 32 to 41% below their market value. To the additional duties it adds a 40% penalty for deliberate breach, which the Court of Appeal upholds in view of the size of the gaps and the well-known rise in prices in the city. The Commercial Chamber of the Cour de cassation (the French supreme court for civil and commercial matters) quashed on 8 July 2026: the extent of the undervaluation does not prove an intent to evade tax. The decision concerns everyone who declares a property without knowing its exact price, and recalls what a carefully prepared valuation brings to the declaration.
The facts
A person died in 2013 leaving, among others, an heir who filed the inheritance tax return on 25 July 2013. On 19 December 2016 the tax authority sent her a reassessment notice challenging the market value of the properties declared. The heir sued the tax authority to obtain discharge of the additional duties and of the 40% penalty for deliberate breach (manquement délibéré).
On 19 May 2025 the Paris Court of Appeal refused to discharge the penalty. It held that the undervaluation of the declared figures, by 31.79% for the studio, 35.50% for the flat and 41.13% for the fourth-floor rooms, “constitutes a significant failure in the assessment of the tax base” (translated from the French), and, adopting the lower court’s reasons, that the well-known rise in property prices in the city could not have escaped the taxpayer.
The decision
The Cour de cassation quashed on the penalty (Cass. com., 8 July 2026, appeal no. 25-17.275).
It restated the two texts. Article 1729, a, of the French General Tax Code: inaccuracies or omissions found in a return “give rise to a 40% penalty in the event of deliberate breach”. Article L. 195 A of the Tax Procedure Code: where tax penalties applied in respect of registration duties are disputed, “the burden of proving bad faith and fraudulent manoeuvres lies with the tax authority”.
It then held that the Court of Appeal had decided “on grounds unfit to characterise Mrs D’s intention to evade tax by supplying inaccurate elements for the determination of its base”. A gap in value, even of 40%, and general knowledge of a rising market are not enough; it must be established that the heir meant to deceive.
What this changes for the valuation
The duties remain due, the penalty does not. The decision does not call the reassessment of value into question: if the properties were worth more at the date of death, the additional duties and late-payment interest are due. What falls is the 40% penalty, which requires intent. For property worth a few hundred thousand euros, the difference between the two runs to tens of thousands of euros.
Good faith is documented. The tax authority must prove the intent to evade; the heir has every interest in making that proof impossible. A return based on a written, dated valuation, with identified comparable sales, prepared by an expert at the date of death, shows that the taxpayer sought the market value rather than understating it. Even if the authority later retains a higher figure, the argument is about references, not intent. Conversely, a figure taken from an old purchase price, or from an estate agent’s sale estimate, invites the argument of the well-known gap.
Market value at the date of death. Article 761 of the General Tax Code retains the actual market value on the day of transfer, according to the parties’ detailed and estimated declaration. The method is comparison with sales of intrinsically similar properties at a close date, which the authority itself must produce in its reassessment notice, with several terms of comparison. An heir with their own report can discuss each comparable: actual floor area, condition, floor, occupation, service charges, easements, date of sale.
Deductions and discounts. A property occupied by a tenant, a joint ownership, a service room let furnished, a main residence occupied by the surviving spouse, which benefits from a 20% deduction (article 764 bis), are not worth their vacant-possession price. A report that applies these adjustments with reasons, rather than assertions, makes the declared value defensible before the authority and, if need be, before the court.
Timing. The tax authority may reassess for three years from registration of the return, and up to six years where a property has not been declared. A valuation prepared at the time of the return can be used throughout that period; a valuation reconstructed three years later, when the reassessment notice arrives, can be too, but it is done with dated references and without an inspection of the property in the condition it was in at the death.
What the expert takes from it
- The gap between the declared and reassessed values, even of 40%, does not on its own characterise a deliberate breach; the tax authority must prove intent.
- The 40% penalty falls, but the additional duties and late-payment interest remain due if the value was too low.
- A written valuation at the date of death, with comparables, is the best evidence of good faith and the best tool for discussing the authority’s references.
- Occupation, joint ownership, the surviving spouse’s deduction: each adjustment is justified in the report.
- The reassessment may arrive three years after the return; the report prepared at the time keeps its full value.
Further reading
The Market value page describes the assignment, its timescale and its fee. The guide Inheritance: value challenged by the French tax office and the glossary entries valeur vénale and abattement complement this article. On the same theme: Inheritance tax: market value, later sale and land comparables and Disguised gift and French tax reassessment. The decision is available on Légifrance.
What next
Is the French tax authority disputing the value declared in an inheritance?
I establish the market value at the date of death with verified comparable sales, in a report that answers the reassessment point by point and shows the care taken over the declaration.
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