You are currently a tax resident of France and have been for at least six of the past ten years. Your grandmother has just passed away in Monaco, where she had been living for more than five years, leaving you movable and immovable property located in Monaco.

Under French law alone, here’s the bad news: You are subject to French inheritance tax on all assets bequeathed to you, even if they are located abroad. These taxes are progressive and can reach up to 55% for related individuals, while the flat rate is 60% for unrelated individuals.

However, according to the Franco-Monegasque tax treaty, France loses the right to tax this gift if the decedent was a national of one of the two signatory countries—that is, if he or she was a Monegasque or French national.

If that is indeed the case, here’s some good news: you won’t have to pay French inheritance tax on these Monegasque assets. Only Monaco will be able to apply its inheritance tax, which is much lower (0% for direct descendants; otherwise, between 8% and 16%, depending on the degree of kinship).

If, on the other hand, the deceased was a citizen of a third country, you’ll have to pay inheritance taxes in France. Do you think you’re just having bad luck?

Not necessarily, because you still have one card left to play.

In fact, we need to look elsewhere—at the other tax treaties signed with France.

Some of these agreements do indeed contain so-called “non-discrimination” clauses, meaning that nationals of the other signatory country will be treated in the same manner as French nationals in the same situation—in this case, those residing in Monaco.

So, returning to the case of your deceased relative who was domiciled in Monaco at the time of his death and who was neither a French nor a Monegasque national, his estate could be treated as if he were a French national, and thus exempt from French inheritance taxes, provided that the country of which he was a national has signed a tax treaty with France containing such a non-discrimination clause. The tax treaty signed between that country and France then applies to the Franco-Monegasque tax treaty: without being either French or Monegasque, the deceased can therefore bequeath Monegasque assets to you—even if you reside in France—without French inheritance taxes applying.

However, before we get too excited, we need to go even further.

First, it must be clear that the non-discrimination clause is general in scope—that is, it is not limited to cases where a person is a tax resident of one of the two signatory countries. Indeed, in such a situation, the clause would not apply to decedents residing in Monaco, a third country not party to the treaty. This excludes a large number of tax treaties and, consequently, many nationalities.

On the other hand, even if the non-discrimination clause is general in nature, it is still necessary to ensure that it applies to the decedent—and not to the heir. However, non-discrimination clauses most often target the taxpayer, who in practice is the estate—and thus the heirs—rather than the decedent himself. This issue is complex, but can be summarized as follows: with regard to inheritance tax, who is the target of the non-discrimination clauses in tax treaties? If it is the estate—which is liable for the tax—that is targeted, the decedent’s nationality will be of little consequence, and France will regain the right to tax. If, on the other hand, it is the deceased who is the subject of these provisions, France will not be able to tax the estate: the deceased will be treated as a French national, and in that case, his or her Monegasque estate will be exempt from inheritance tax in France.

After some initial uncertainty, case law seems to indicate that it is indeed the deceased who can benefit from these non-discrimination clauses, even if he or she is not the person liable for the inheritance taxes in question—which is good news.

As of this writing, we have identified several countries whose anti-discrimination clause could thus be incorporated into the Franco-Monegasque agreement, thereby exempting you from French inheritance taxes on property located in Monaco: For example, your grandmother would need to be a national of Italy, Lebanon, the United Arab Emirates, Côte d’Ivoire, etc.

So, if your ancestor had the good sense to be a citizen of France, Monaco, or one of those countries…you inherit her Monegasque assets without having to pay inheritance tax in France.