Stay invested and don’t try to second guess the market – Discipline is rewarded
By Derek Winsland
This article is published on: 6th May 2016
Individual investors may face many “known unknowns”—that is to say, things that they know they don’t know. The UK’s referendum on EU membership is one of them, confronting people with a large degree of uncertainty. But as we’re witnessing, it’s not just the investor that’s afflicted by this Known Unknown condition – the markets are really uncomfortable as evidenced by the fall in the value of the pound.
We have though been here before; perhaps not having to make decisions that could affect our financial stability for years to come, but as the chart below shows, major global events that have impacted on our lives to a greater or lesser effect. Through all of them, the markets have shown a remarkable resilience over the longer term and that is one of the most important lessons the individual investor can learn.
You see, it’s not necessary to “make the right call” on the referendum or its consequences to be a successful investor. Our approach is to trust the market to price securities fairly; to take account of broad expectations of future returns.
In arguing for the status quo, the “remain” campaign is able to point out familiar characteristics of membership.
The “out” campaign, however, is based on intangibles that can only be resolved after the result of the referendum is known. It is impossible for any individual to predict the implications of these unknowns with certainty.
But this is no cause for concern. While the referendum is imminent and its implications are potentially vast and unpredictable, it is not necessary for individual investors to make any judgement calls on the outcome. We have faced many uncertainties in the past—general elections, market crises, recessions, wars—and throughout all of them, the market has done its job of aggregating participants’ views about expected returns and priced assets accordingly.
And while these events have caused uncertainty, volatility and short-term losses and gains, none of them has altered the expectation that stocks provide a good long-term return in real terms.
We have a global view of investing, and we know that the market is very good at processing information that is relevant to future returns. Because of this view, we don’t attempt to second-guess the market. We manage well-diversified portfolios that do not rely on the outcome of individual events or decisions to target the expected long-term return.
These events are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news. Past performance is no guarantee of future results. MSCI data © MSCI 2016, all rights reserved.
Research has demonstrated time and again that the best returns are achieved through ‘Time in the Market’ and not by trying to ‘Time the Market’; in other words, stay invested rather than guess the best time to invest and disinvest.
If you would like more information on our investment philosophy, please ring for an appointment or take advantage of our Friday Morning Drop-in Clinic here at our office in Limoux. And don’t forget, there is no charge for these meetings.
French Tax Return dates 2016
By Spectrum IFA
This article is published on: 11th April 2016
The time is approaching for French residents to make their 2016 income tax declarations and there is an important change in procedure.
If your revenue fiscal de reference (taxable income) was at least €40,000 in 2014 (i.e. as declared in 2015), then you are now obliged to make an on-line declaration. The only exception to this is if your principal residence does not have an internet connection, in which case, you can still submit a paper declaration. By 2019, only on-line declarations will be possible and between now and then, the ceiling of the income limit for paper declarations will reduce each year.
On-line declarations can be made from 13th April 2016 up to the following deadlines:
• 24th May 2016 for departments 01 to 19;
• 31st May 2016 for departments 20 to 49; and
• 7th June 2016 for all other departments and non-residents.
Paper declarations, where permitted, must be submitted by 18th May 2016.
For those of you who came to live in France during 2015, then you will need to make your first French tax declaration and declare all your worldwide income and gains, but only for the period since becoming resident in 2015. To do this, you will need to collect the necessary forms from your local tax office.
Income and gains that might be tax-free in another country, for example, UK ISAs, premium bond winnings and Pension Commencement Lump Sums, must be declared, as all are taxable in France. Even for income that is taxable in another country, for example a UK government type of pension (i.e. civil service, military, police and teachers pensions, but not State pensions) and/or UK property rental income, the amount must still be reported in France and it will be taken into account in calculating your French income tax. You will then be given a tax reduction to take into account the fact that the income is taxable elsewhere.
If you have been living in France for less than 183 days in 2015, you may be thinking that you do not need to register in the French tax system. This is a myth because the time that you spend in France is not the only factor that is taken into account in determining whether or not you are resident in France. For more on this, please see my article at:
If you do not register in the French tax system and you should have done, you risk a financial penalty. Never mind what that nice lady in the tax office says about you not needing to register if you have been here for less than a year – you will be liable for the fine, not her!
Are you convinced now to register in the system? If you’re still not sure, call me and with just a few questions, I will be able to tell you.
It is also obligatory to declare the existence of bank accounts and life assurance policies held outside of France, regardless of whether these accounts pay interest or if there is a zero balance in the account. The penalties for not doing so are €1,500 per account or contract, which increases to €10,000 if this is held in an uncooperative State that has not concluded an agreement with France to provide administrative assistance to exchange tax information. Furthermore, if the total value of the accounts and contracts not declared is at least €50,000, then the fine is increased to 5% of the value of the account/contract as at 31st December, if this is greater than €1,500 (€10,000 if in an uncooperative State).
No-one should ever try to second guess the Fisc or think that they can out-manoeuvre this government department. I hear some interesting stories of people being contacted and questioned about why they are not registered in the French tax system. You would be amazed at what is used to check – telephone bills, utility bills, etc., etc. How long will it be before our use of cash machines and our bank and credit card transactions in shops might be used to verify how much time we spend in France? Scary thought and actually they probably don’t need to go that far, as we can be tracked through our mobile phones and probably also our internet use.
On a final note, if anyone finds that they need to complete the pink 2047 form, this means that you have foreign income and/or gains to declare. If this is for any reason other than pension income and earnings, then perhaps you may benefit from a brief discussion to see if your financial situation can be improved by investing in something that is more tax-efficient for French residency.
If you would like to have a confidential discussion with one of our financial advisers, you can contact us by e-mail at limoux@spectrum-ifa.com or by telephone on 04 68 31 14 10. Alternatively, drop-by to our Friday morning clinic at our office at 2 Place du Général Leclerc, 11300 Limoux, for an initial discussion.
The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter at
https://spectrum-ifa.com/spectrum-ifa-client-charter/.
Le Tour de Finance
By Spectrum IFA
This article is published on: 21st March 2016
The first spring leg of Le Tour de Finance has finished in France, with three events being held in Limoges, Poitiers and Mouzeil.
The events were a resounding success with attendance up on last year and an extended pool of international guest speakers present for the three events. The organisers work hard to bring representatives from large international financial institutions to these events, giving attendees unrivaled personal access to these experts and asksome of those ‘need to know’ questions in a small and informal group. Each event ends with a complimentary buffet and offers attendees even more personal access to the experts.
Le Tour de Finance will return to France in May with events in Toulouse, Bergerac and Brantome with further events in June.
Le Tour de Finance – Italy
Le Tour de Finance continues in April with events in La Spezia on the 13th April and in Milano on the 14th April. More information and booking information can be found here.
Le Tour de Finance – London
We are also pleased to announce that Le Tour de Finance will be running an event in London. This is the perfect opportunity for those of you who are thinking of making the move to France and will allow you to ask these experts direct questions about becoming an expat.
For more information about Le Tour de Finance in London please click here
Le Tour de Finance – Spring Seminars
By Spectrum IFA
This article is published on: 23rd February 2016
The spring run of Le Tour de Finance seminars in France is kicking off this week on the 8th March in Limoges and then moves on to Poitiers on the 9th March and Mouzil on the 10th March.
Le Tour de Finance in 2015 proved to be the most popular series of events ever and we celebrated the 100th event in November. The seminars offer English speaking expats a chance to meet various experts from fields including; specialist expat independent financial advice, mutli-asset wealth management, currency exchange, QROPS/pensions and expat tax advice. The experts represent a range of international institutions giving attendees unprecedented access to ask those nagging questions about living as an expat in France.
The events commence at 10am with a welcome coffee followed by a series of short and informative presentations. The seminars are wrapped up with a free buffet lunch and the chance to personally meet these experts and mingle with other like minded expats.
The next events are:
| 8th March 2016 | Haute-Vienn Limoges | Register Now | |
| 9th March 2016 | Poitou-Charentes Poitiers | Register Now | |
| 10th March 2016 | Pays de la Loire Mouzeil | Register Now |
If you would like further information or would like to book a place, please contact us
The objective of Le Tour de Finance is to provide expatriates with useful information relating to their financial lives. We try and cover frequently asked questions that we receive from our clients. It would be helpful for us to know what your particular areas of interest might be.
For further details and to book your place at a future event please register here or complete the form below.
Personal Financial Planning in France – if I knew then what I know now…
By Jonathan Cooper
This article is published on: 9th February 2016
A British National, I came to France in 1996 for what was meant to be a 3-year local contract. But here I am, still living in France 20 years later. Sound familiar?
This year, at the age of 57, I stopped full-time employment, though I expect to stay in France for some years to come. Here are a just few of the useful things I’ve learned over the years, as an expat in France, focusing on tips for those of you who are still relatively new to France.
Tax efficient investment vehicles
The ISA doesn’t exist in France, but the Plan d’Epargne en Actions (PEA) and the Assurance Vie (AV) do. One can invest 150k euros in a PEA, and after 5 years the gains are free from Capital Gains Tax (CGT). There is no limit to the number or amount invested for AV’s, and after 8 years, any gains on withdrawal attract only 7.5% tax (over 9200 euros/yr). Both PEA’s and AV’s attract Social Charges on investment gains. With present interest rates low, an AV older than eight years is a much better option than a savings account (Compte Epargne). Your employer might also offer you a Plan d’Epargne d’Enterprise (PEE) where investment gains are free from CGT after 5 years.
My advice to anyone becoming tax resident in France is to open a PEA and an AV as soon as you arrive, with just a small initial investment, just to get the clock ticking. You can always close them if your short term contract turns out to be just that!
Pensions, QROPS & PERPs
Years worked in the UK can be transferred to the French system, and additional years purchased at little cost, which can greatly increase the value of your French Pension.
With the 15-year Gilt Rate presently so low, UK pension pot valuations are very high. If you are thinking of staying overseas, it is a good time to consider the Pro’s and Con’s of transferring your pot to a Qualifying Recognised Overseas Pension Scheme (QROPS).
Each year you can invest up to 10% of your salary free of income tax (within the maximum of 8 times the Social Security ceiling) in a Plan d’Epargne de Retraite (PERP), and you can accumulate up to 3 years if you do not use this 10% annual allowance. If you have been made redundant, at the end of the 3-year period of unemployment benefit, you can withdraw all the funds from a PERP free of CGT, so avoiding taking an annuity. Investments in a PERP are not subject to Wealth Tax (ISF).
Getting good, in-depth financial advice
I have always worked with one of the big French Banks and whilst they offer a range of products, their understanding of the needs of Anglo-Saxons is not always high. They recommend mainly in-house products and could be a lot more pro-active.
My employers were kind enough to offer me big consultancy companies to help fill out my annual French tax forms. The introductory meetings with senior directors always went well, but it was clear the forms were filled out by very junior staff, and their aim was to fulfil a service to the employer as much as to me – they are not at all there to offer advice and optimise tax.
Whilst it’s taken me a while to realise, it’s best to seek the assistance of specialist independent financial advisers, people who really understand both the UK and French financial space. I like to have more than one, in addition to the bank, to ensure several points of view/proposals on which to base decisions.
From experience, I can certainly recommend Jon Cooper (The Spectrum IFA Group) and Thierry Mandengue (VIP Partner) – they have undoubtedly saved me tens of thousands of euros.
In my next article, I will share my knowledge of Stock Options, PEE’s and Inheritance planning. I’d be happy to discuss expat finance further if anyone is interested (mspowell58@gmail.com).
*This article has been written by Dr. Martin Powell, a retired, British, Senior Corporate Executive living in France and a client of Jonathan Cooper
French Tax Changes 2016
By Spectrum IFA
This article is published on: 12th January 2016
During December, the following legislation has entered into force:
- the Loi de Finances 2016;
- the Loi de Finances Rectificative 2015(I); and
- the Loi de Financement de la Sécurité Sociale 2016
Shown below is a summary of our understanding of the principle changes.
INCOME TAX (Impôt sur le Revenu)
The barème scale, which is applicable to the taxation of income and gains from financial assets, has been revised as follows:
| Income | Tax Rate |
| Up to €9,700 | 0% |
| €9,701 – €26,791 | 14% |
| €26,792 – €71,826 | 30% |
| €71,827 – €152,108 | 41% |
| €152,109 – plus | 45% |
The above will apply in 2016 in respect of the taxation of 2015 income and gains from financial assets.
WEALTH TAX (Impôt de Solidarité sur la Fortune)
There are no changes to wealth tax. Therefore, taxpayers with net assets of at least €1.3 million will continue to be subject to wealth tax on assets exceeding €800,000, as follows:
| Fraction of taxable Assets | Tax Rate |
| Up to €800,000 | 0% |
| €800,001 to €1,300,000 | 0.5% |
| €1,300,001 to €2,570,000 | 0.7% |
| €2,570,001 to € 5,000,000 | 1% |
| €5,000,001 to €10,000,000 | 1.25% |
| Greater than €10,000,000 | 1.50% |
CAPITAL GAINS TAX – Financial Assets (Plus Value Mobilières)
Gains arising from the disposal of financial assets continue to be added to other taxable income and then taxed in accordance with the progressive rates of tax outlined in the barème scale above.
However, the system of ‘taper relief’ still applies for the capital gains tax (but not for social contributions), in recognition of the period of ownership of any company shares, as follows:
- 50% for a holding period from two years to less than eight years; and
- 65% for a holding period of at least eight years.
This relief also applies to gains arising from the sale of shares in ‘collective investments’, for example, investment funds and unit trusts, providing that at least 75% of the fund is invested in shares of companies.
In order to encourage investment in new small and medium enterprises, the higher allowances against capital gains for investments in such companies are also still provided, as follows:
- 50% for a holding period from one year to less than four years;
- 65% for a holding period from four years to less than eight years; and
- 85% for a holding period of at least eight years.
The above provisions apply in 2016 in respect of the taxation of gains made in 2015.
CAPITAL GAINS TAX – Property (Plus Value Immobilières)
Capital gains arising on the sale of a maison secondaire and on building land continue to be taxed at a fixed rate of 19%. However, a system of taper relief applies, as follows:
- 6% for each year of ownership from the sixth year to the twenty-first year, inclusive; and;
- 4% for the twenty-second year.
Thus, the gain will become free of capital gains tax after twenty-two years of ownership.
However, for social contributions (which remain at 15.5%), a different scale of taper relief applies, as follows:
- 1.65% for each year of ownership from the sixth year to the twenty-first year, inclusive;
- 1.6% for the twenty-second year; and
- 9% for each year of ownership beyond the twenty-second year.
Thus, the gain will become free of social contributions after thirty years of ownership.
An additional tax continues to apply for a maison secondaire (but not on building land), when the gain exceeds €50,000, as follows:
| Amount of Gain | Tax Rate |
| €50,001 – €100,000 | 2% |
| €100,001 – €150,000 | 3% |
| €150,001 to €200,000 | 4% |
| €200,001 to €250,000 | 5% |
| €250,001 and over | 6% |
Where the gain is within the first €10,000 of the lower level of the band, a smoothing mechanism applies to reduce the amount of the tax liability.
The above taxes are also payable by non-residents selling a property or building land in France.
SOCIAL CHARGES (Prélèvements Sociaux)
To date, social charges have been levied to fund certain social security benefits in France, as well as the compulsory sickness insurance schemes.
Hence, if you are resident in France, these are charged on your worldwide investment income and gains, even though this does not give any automatic right to French social security benefits and health cover. The current rate is 15.5% and the charges are also payable by non-residents on French property rental income and capital gains.
As has been widely publicised, on 26th February 2015, the European Court of Justice (ECJ) ruled that France could not apply social charges to ‘income from capital’, if the taxpayer is insured by another Member State of the EU/EEA. Income from capital includes investment income on financial assets and property rental income, as well as capital gains on financial assets and real estate.
Fundamental to this decision was the fact that the ECJ determined that France’s social charges have sufficient links with the financing of the country’s social security system and benefits. EU Regulations generally provide that people can only be insured by one Member State. Therefore, if the person is insured by another Member State, they cannot also be insured by France and thus, should not have to pay French social charges on income from capital.
In the main, the ECJ ruling affects people who have retired to France and hold a Certificate S1 that has been issued by another Member State, as well as those people who work in another Member State, but live in France.
On 27th July 2015, the Conseil d’Etat, which is France’s highest court, accepted the ECJ ruling, which paved the way for those people affected to reclaim social charges that had been paid in 2013, 2014 and 2015. Happily, this also included residents of any EU/EEA State who had paid social charges on French property rental income and capital gains.
In order to circumvent the ECJ ruling, France has amended its Social Security Code. In doing so, it has removed the direct link of social charges to specific social security benefits that fall under EU Regulations. The changes take effect from 1st January 2016, which means that social charges continue to be applicable at the rate of 15.5% on income from capital.
EXCHANGE OF INFORMATION UNDER COMMON REPORTING STANDARD:
2016 brings a new era in global automatic exchange of information between tax authorities.
Close to 60 countries are ‘early adopters’ of the OECD’s Common Reporting Standard (CRS), including all EU States (except Austria) and the popular offshore jurisdictions of the Isle of Man, Guernsey, Jersey & Gibraltar. As such, these early adopters start collecting information from 1st January 2016 to share by the end of September 2017.
Other countries, including Austria, Switzerland, Monaco, Australia, New Zealand and Canada have committed to start sharing data in 2018.
In the EU, the CRS has been brought into effect through the EU Directive on Administrative Cooperation in the Field of Taxation, which was adopted in December 2014. The scope of information exchange is very broad, including investment income (e.g. bank interest and dividends), pensions, property rental income, capital gains from financial assets and real estate, life assurance products, employment income, directors’ fees, as well as account balances of financial assets.
No-one is exempt and therefore, it is essential that when French income tax returns are completed, taxpayers declare all income and gains – even if this is taxable in another country by virtue of a Double Taxation Treaty with France.
It is also obligatory to declare the existence of bank accounts and life assurance policies held outside of France. The penalties for not doing so are €1,500 per account or contract, which increases to €10,000 if this is held in an ‘uncooperative State that has not concluded an agreement with France to provide administrative assistance to exchange tax information. Furthermore, if the total value of the accounts and contracts not declared is at least €50,000, then the fine is increased to 5% of the value of the account/contract as at 31st December, if this is greater than €1,500 (€10,000 if in an uncooperative State).
11th January 2016
This outline is provided for information purposes only. It does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action to mitigate the effects of any potential changes in French tax legislation.
Le Tour de Finance – 100th event in Dinard
By Spectrum IFA
This article is published on: 15th November 2015
Our 100th financial seminar was quite rightly our biggest yet with approximately 90 attendees out of the 106 who had RSVP’d.
Guest speakers from Rathbones, SEB, Tilney Best Invest, Prudential International and Standard Bank all flew in specially for this event alongside the organisers and founders, Pippa Maile from Currencies Direct and Michael Lodhi from The Spectrum IFA Group.
The venue, Le Grand Hotel Dinard, was a fabulous location with first-class service and an excellent buffet lunch to finish.
There were plenty of prized to mark the event – five lucky attendees went home with 100euros in cash each, everyone received a goodie bag plus there was a prize draw for other prizes including champagne, signed British rugby shirts and autographed books.
Thank you to everyone who came along and made this such a great success. If you are one of the people who unfortunately had to cancel at the last minute, please feel free to drop us a line at seminars@ltdf.eu if you would like copies of the presentations or have a specific topic that you would like advice on.
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French Social charges on UK pensions and investment income
By Amanda Johnson
This article is published on: 13th November 2015
I read online that there have been several changes to Social charges on UK pensions and investment income for British expats living in France. Is this true?
This question is very pertinent at the moment, as there have been changes and there is a time limitation on some of the possible reclamations. Therefore, prompt action is needed.
Since 27th July 2015, it has been ruled by the French Government under “Le Conseil d’Etat no. 333551” that if you are in receipt of a UK State Pension and an S1 Certificate, that the UK Government pays for your healthcare costs in France.
If this is the case (and there are some exceptions) then the French Government cannot charge you any social charges on these incomes.
They have also stated that you can reclaim any social charges paid on earnings in 2012 (2013 Avis d’Impot) and since this date. You will firstly need to check your 2013, 2014 and 2015 forms, detail any social charges paid and send a letter in French claiming this back from your local French tax office, referencing “Conseil d’Etat no. 333551”. I recommend you send this recorded delivery as timescales apply.
The deadline for 2013 reclaims is 31st December 2015 so it’s a good idea to get these sent off as soon as possible and, as your application may be the first your local tax office has received, be prepared to have to follow up your letter with a personal visit.
If you would like to discuss your personal situation please get in touch!
Whether you want to register for our newsletter, attend one of our road shows, follow my blog or speak to me directly, please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.
Can you make decent profits without a degree of market risk?
By Spectrum IFA
This article is published on: 22nd October 2015
My article last month focussed on types of risk that that can present danger to the unwary investor. My top two risk types were Institutional Risk and Market Risk, but I concentrated mainly on my third risk factor – Foreign Exchange, largely because of my previous experience in this field. I was quite surprised by the interest the article produced, partly because the people who commented weren’t really ‘grabbed’ by F/X risk; but rather more interested in the other two categories. Can the modern investor really fall foul of institutional risk? Is anyone really daft enough to think that you can have decent profits or returns without taking on some degree of market risk? Unfortunately, the answer to both those last two questions is yes. I thought you might be entertained if I gave you some examples that hopefully won’t ring too many bells from your own experiences…
In 2009 I met a very interesting lady who was referred to me by a colleague in Spain, not that that is particularly relevant, but I did end up wondering if she’d had too much sun. All I knew before I met her was that she was due to receive a large sum shortly, and she wanted some investment advice. I spent ninety minutes with her, most of which was taken up with a battle of hope over reality. This unfortunate lady had been investing for a number of years with an organisation called The Liberty Wealth Club, and was 100% confident that she would be receiving a pay-out of $150,000 from the club in a matter of weeks. The more I listened, the more appalled I became, for this was truly a forerunner of a ‘Ponzi’ scam, labelled and outlawed in the UK as a Multi-Level Marketing scheme. Nothing I could say to her would make her listen. In the end, I told her that I would be delighted to help her invest her funds when they arrived, and we agreed to meet again on that basis. I never heard from her again.
A year or so later I took on a new client with a much more understandable problem. He had bought an apartment in Spain ‘off-plan’, with a view to selling it on before completion, at a healthy profit. As far as I’m aware, to this day he is still the legal owner of this apartment, although he returned the keys and stopped paying the mortgage years ago. It is a nightmare waiting to revisit him.
Another client with a similar problem bought a flat in Budapest, again unbuilt and ‘off plan’. The amount invested was sizeable, and it took four years for a brick to be laid. In desperation he eventually managed to sell it at a 60% loss.
Undeterred, this same client, before I met him I might add, then decided to invest in a forestry scheme designed to give him a regular income payment for the rest of his life. Unfortunately a drought seems to have interfered badly enough for the income to have dried up (sorry) completely.
Recently I have come across a mind-boggling concept called GCR – Global Currency Reset. Please, please, do not let anyone persuade you to invest any of your hard earned cash building up reserves in currencies such as the Iraqi Dinar or the Vietnamese Dong in the expectation that they will soon be revalued overnight and make your fortune. Believe me, this is not going to happen.
Sane people make these totally irrational investment decisions, albeit whilst temporality on the throes of some form of dangerous mental instability, as it is the only justification I can think of. Please do not be tempted to join this group of dramatic under-achievers. Sound financial advice may seem boring; much along the lines of ‘single digit gains’ and ‘realistic investment profiles’. Sound financial advice will however always save you from the nightmares that can result from your own flights of fancy, should you be that way inclined. And believe me, some of you are.