With care YOU prosper
By Spectrum IFA
This article is published on: 3rd October 2014
I’m getting an increasing number of calls from expats based here in France who are very worried and sometimes completely dismayed by the financial advice they have received elsewhere. Worried by the fact that their investments have decreased in value, and dismayed when they realise that they cannot even withdraw their money or cancel their polices, as parts of the investment are now in funds that have been suspended (that is no-one can either buy them or sell them).
Now I’m not looking to get into any legal wrangle with the company concerned, and it is only one company, but I think this is a suitable time to flag up what is happening in the hope that some of you will avoid falling into this situation in future. I will also add that I am prepared to ‘adopt’ clients in this situation, in order to ensure as fruitful an outcome for the client as possible.
What is happening is not illegal, but it could certainly be regarded as unethical. The clients concerned have either unwittingly or deliberately chosen to put their faith in an adviser who is not regulated in France. This is not illegal, because we are all part of the wonderful organisation that is Europe, and that frees Europeans to ply their trade in other countries within the Euro block. That freedom of trade is not, however, backed up by a freedom of regulation. If you live in France and have cause to complain about advice you have received, the French regulator will show no interest in your case if the adviser is not in his jurisdiction. You will be guided to seek help from the regulator in the country where the adviser is based, and hopefully regulated. Good luck.
There are two main problems that I am seeing at present. The first relates to the quality of funds in which the clients are invested. At The Spectrum IFA Group we have an investment team that spend many hours evaluating hundreds, if not thousands, of funds and produce a recommended list for clients to invest in. There are of course hundreds of thousands of funds available, and we can’t look at them all, so we do allow our clients to choose their own investments if they wish, thereby ignoring our recommendations. All we ask, in this instance, is that you sign a form to accept that the investment was your choice. There are many good funds out there, but there are also some bad ones. All of the (now) clients who have suffered in this way have been put into a single asset class which has had a disastrous time in the past eighteen months. Needless to say, none of the funds involved are on our recommended list.
The second issue centres on a specific type of investment called a structured note. These are often complex derivative products, and the type of note that I am now seeing regularly, certainly falls into that category. So much so, that the product notes that accompany the investment clearly state that this is only for seasoned professional investors, who are willing to accept the potential for serious loss of capital. None of the people I’m taking to fall into that category. The structured note is an interesting concept, and not all of them are overly complicated. You may have seen me write about such a note in the past, and you may have seen such a product at our seminars, offering an excellent 12 month fixed deposit rate alongside a five year deposit where the reward is linked to the performance of the stock exchange index. Not exactly ‘Janet and John’ stuff, but I like to think that I can explain it completely to my clients. And I don’t use it unless I’m completely sure that the client also understands it. I don’t understand the notes I’m seeing recently, and I’m sure the client doesn’t either.
So why sell them? Simply because the companies that make up these products factor in an element of commission to the brokerage that sells the note to the end user, the client. Now I don’t know how closely you look at small print when you read articles from me or Daphne, but if you look at the bottom of this article you will see reference to our client charter at spectrum-ifa.com/spectrum-ifa-client-charter
If you have read the charter, or are just about to do so, you will see or have seen this:
Some investment funds or products within an Insurance policy may generate an additional initial commission. If this is the case, we undertake to rebate this commission to you (in full) by way of increased allocation.
Strangely (not), none of the new clients I’m speaking to seem to have benefitted from this principle. It seems clear to me that funds are being pedalled for the advisers benefit, not the clients. This is a very dangerous practice.
I must stress that no laws have been broken here, and no fraud has taken place. I sell a simple structured note, but I pass on the commission. I even have clients who are invested in the struggling asset class that we have been talking about, but only by their own choice, and for many months now that has been contra to our advice.
Be safe – use locally produced goods, and that includes financial advice.
If you have any questions on this, or any other subject, please don’t hesitate to contact me.
Investments and investment risk
By Spectrum IFA
This article is published on: 16th September 2014
As I am writing this article, the hot topic of the moment is of course the Scottish Referendum on Independence. The polls are swinging from one direction to the other, but only by a small margin between the ‘yes’ and the ‘no’ camps. The final result will most likely be very close.
Even the Queen has uncharacteristically got a little involved in the politics, by expressing her hope to a well-wisher in Scotland that people will think very carefully about the future. Whatever the result of the referendum, it is clear that the United Kingdom will change.
What will happen to investment markets if Scotland votes yes? Well the wider world outside of Scotland seems to have woken up to what is actually happening in Scotland. Sterling has weakened amidst the uncertainty of the outcome, but beyond this, I am not bold enough to forecast any further effect on markets. Like any other investment risk, it needs to be managed.
On this subject, The Spectrum IFA Group has produced a Guide to Investment Risk. This has been written in plain, no nonsense, down-to-earth English and covers a range of assets classes and strategies. The individual articles included in the Guide can be found on our website at: spectrum-ifa.com/spectrums-guide-to-investment-risk/
Alternatively, if you would like to receive a full copy of this Guide, please contact me.
We are also taking bookings for our Autumn client seminar – “Le Tour de Finance – Bringing Experts to Expats”. Our industry experts will be presenting updates and outlooks on a broad range of subjects, including:
- Financial Markets
- Assurance Vie
- Pensions/QROPS
- Structured Investments
- French Tax issues
- Currency Exchange
Places for our seminars are limited and must be reserved, in advance. So if you would like to attend the event, please contact me as soon as possible. The date for the local seminar is
Friday, 10th October 2014 at the Domaine Gayda, 11300 Brugairolles.
Alternatively, if you are reading this further afield, you may be interested in attending one of our other events:
- Wednesday, 8th October – St Endréol, 83920, La Motte, the Var.
- Thursday, 9th October – Chateau La Coste, 13610, Le Puy-Sainte-Réparade.
For full details of all venues can be found on our website at spectrum-ifa.com/seminars
If you cannot attend one of our seminars and you would anyway like to have a confidential discussion about any aspect of financial and/or inheritance planning, please contact me either by e-mail at daphne.foulkes@spectrum-ifa.com or by telephone on 04 68 20 30 17.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.
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 spectrum-ifa.com/spectrum-ifa-client-charter
CGT and social charges applied to rental income and investments in France
By Amanda Johnson
This article is published on: 14th September 2014
I often get asked to explain how French Capital Gains Tax is applied and when & if they can expect social charges to be levied on their investments. These are two very interesting areas for expats:
Capital Gains tax
A capital gain arises when an asset has been sold for more than it was originally bought for. For example if you originally invested £50,000 in a unit trust and now sell it for £75,000. Your gain is £25,000 and therefore has a potential liability for Capital Gains Tax. Different levels of relief apply depending on how long you have held this investment, so not all of the gain is subject to tax.
Capital Gains Tax is also due is when a house is sold for profit which isn’t your primary residence. You may live in France permanently in rental property however, if you have sold your UK home and made a profit, this profit is subject to Capital Gains Tax in France. This applies even if it is the only property you own. Again there are different levels of tax relief depending on how long you have owned the property.
There are tax efficient investments and savings for expats that shelter your liability to capital gains and now you are living in France you should be taking advantage of them.
Social Charges
Social Charges are applied to all income, irrespective of where it is earned. There are as several exceptions to this, namely Government & UK State Pensions. If you rent out property in the UK, although you may pay your income tax in the UK you will have to pay Social Charges on the income in France. Social Charges also apply if you receive an income from savings, investments or a private pension.
There is a double taxation treaty in place which means you won’t pay income tax twice when you complete your tax return here in France but income tax should not be confused with Social Charges.
Social Charges can also be charged on certain Assurance Vies’ and this depends on the type of fund that you are invested in. If your Assurance Vie is invested in a Fonds en Euros, where growth is physically applied periodically, social charges will be due. This is not the case on several other Assurance Vie options, where social charges are only levied once a withdrawal is made & only apply to the gain proportion of the withdrawn amount.
If you have existing investments whether in France or in the UK it is worth contacting me to chat about the most tax efficient way to hold your savings and keep the tax you pay to a minimum.
Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please contact me below and & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.
Buying property – the alternative options
By Peter Brooke
This article is published on: 10th September 2014

Having a real estate investment is often an excellent decision for any investor, but many don’t have the ability to own a complete house or apartment. They may not have enough capital to buy the property outright, fund a deposit or receive enough income to be able to afford a loan.
For crew, it also can be difficult to get a mortgage due to the offshore nature of their income, though it is possible in some countries. So what other options might there be for having invested capital in the various property markets around the world?
Collective Investment Schemes:
There are many mutual funds that invest into bricks and mortar. Most of these buy into commercial property in developed markets, such as the UK or Europe. They are managed by professional managers and diversify across several commercial sectors, such as office buildings, retail stores (split between “out-of-town” and “high street”) and industrial complexes. They also always hold a portion of the portfolio in cash and property equities, i.e., the quoted shares of building contractors and the like. The cash and shares are to maintain liquidity so funds are available to investors who need to make a withdrawal without selling huge office blocks. The legal structure of property funds is very important to watch. During the financial crisis, several offshore funds (domiciled in the likes of the BVI and Cayman Islands) suspended and have since begun to liquidate, losing many investors their money; some are still suspended. At the same time, there were no UK authorized property funds that suspended.
Fractional ownership:
Although this term has broadened in the last decade, it basically means owning parts of a property. It tends to be most popular in the residential sector and can cover the entire range of property, from distressed sales and repossessions to luxury property clubs. You’re the legal owner of a share in the property; therefore, your name will appear on the deed and you share in the property’s costs and profits and are legally liable. One unique system available is to own “bricks” of property. This is when a company buys real estate at a discount, renovates if necessary and then sells “bricks” for a proportional price. This system allows an investor to own many bricks in many different properties, thereby hugely diversifying their property exposure. Their share of the rent is paid to them (after any management costs), and they can sell their bricks on a specially designed marketplace. An example of a market maker in this sector would be ownbrix.com.
When buying real estate, it’s wise to understand all the legal and tax implications of owning it, as it’s physically located in a jurisdiction and liable to the taxes in that location. If in any doubt, get advice.
Le Tour de Finance returns this autumn
By Spectrum IFA
This article is published on: 2nd September 2014
After a very successful string of events earlier in the year, Le Tour de Finance is back during October 2014.
These previous events were great success, with large numbers attending all the events with fact filled sessions followed by an opportunity for an informal questions and answers session over complimentary refreshments and a buffet.
The relaxed and open forums are a chance to expand your knowledge of personal finance as an expat resident in France. The panel of speakers are experts in their respective fields and are there to answer questions you may have about protecting and strengthening your personal financial situation while a resident in France.
The Spectrum IFA Group is an European leader in professional personal financial advice and will be covering subjects such as; QROPS, pensions, tax advice, investments and wealth management, healthcare, and mortgages.
Le Tour de Finance is an excellent and relaxed forum in which you can get those important questions answered, plus mingle in a pleasant and relaxed atmosphere with other expat residents whilst enjoying a buffet lunch. The free sessions commence at 10.00 and will finish at 14.00.
- Wednesday, 8th October – St Endréol, 83920, La Motte, the Var.
- Thursday, 9th October – Chateau La Coste, 13610, Le Puy-Sainte-Réparade.
- Friday, 10th October – Domaine Gayda, 11300 Brugairolles.
To book your place please click here
Le Tour de Finance – “Bringing Experts to Expats”.
Do you know which country you are resident in?
By Spectrum IFA
This article is published on: 25th August 2014
In my travels I meet lots of people who claim not to know where they live. This isn’t an age or an alcohol problem, and to be fair it would be better to describe them as not knowing where they reside, or are resident. In many cases a few minutes explanation, or a paragraph in a report, does the trick. There are a number of die-hards however who really don’t want to recognise the obvious. And then sometimes it isn’t really all that obvious at all.
The problem is that the central argument is so convoluted that it is far too long to cover completely in this article, and of course we also need to look at what the French regard as the deciding factors in French residence. So what I’m going to do here is dip into both pools and see if I can point you in the right direction, with the clear risk that I might confuse you completely.
The French side of the equation is quite easy to understand (if you want to, that is).
You are resident in France if:
a) Your home is in France, which includes where your main home is or where your family lives.
b) Your principal place of residence is in France. This applies if you spend more than 183 days in France per year. Even if you spend less than 183 days per annum in France but have a permanent home available in France, you’re ‘in’.
c) Your business activities in France, whether salaried or otherwise, are managed from France unless you can show that this business activity is incidental to your main employment.
d) The centre of your economic interests is France, meaning that you have your main investments in France or they are managed from France or that you derive the majority of your income from French sources.
So many times I hear ‘but I have a UK address and no-one can tell how much time I spend in France’. A dead give-away in anyone’s language that. It’s nearly subtle, but really it’s the same as the difference between tax avoidance and tax evasion, and it’s the wrong side of the coin. In the modern days of passport scanning it is also plainly incorrect. If you really want to ignore all of the points above and claim to be non French resident, you must really be claiming to be UK resident, mustn’t you? So let’s look at how HMR&C have ‘clarified’ UK residence. Please note we are ignoring UK domicile here, That’s another can of worms altogether.
Here’s what it takes to be a guaranteed UK resident.
You need any of these factors:
a) You spend 183 days or more in the UK.
b) You have only one home and that is in the UK (or more than one home and all are in the UK).
c) You work full time in the UK, ie, a continuous period of 9 months and at least 75% of your duties are carried out in the UK.
Now for most of the people I meet this presents a bit of a problem. Ever helpful though, HMR&C do recognise that there can be people who qualify for UK residence that can’t claim any of the above, so to help them they have come up with a list of ‘connecting factors’. I call them ‘back door passes’.
Connecting factors
- If you have family in the UK – spouse/civil partner and/or minor children.
- Whether there is available accommodation in the UK.
- Substantive employment in the UK (40 or more days).
- UK presence in previous years – if you have been UK resident for more than 90 days in either of the previous two UK tax years.
- More time spent in the UK in the tax year than any other single country.
Pay attention here, – it’s getting complicated! To be counted as UK resident, and therefore not French resident, you need to combine days spent in the UK with the connecting factors as shown below:
Number of days that make you UK resident |
Connecting Factors |
16 – 45 | 4 factors |
46 – 90 | 3 factors |
91 – 120 | 2 factors |
121 – 182 | 1 factor |
183 or more | Always resident |
There, easy isn’t it? Alternatively of course, one could take one’s head out of the sand and go legal as a French resident…
If you have any questions on this, or any other subject, please don’t hesitate to contact me.
The Spectrum IFA Group advisers do not charge any fees for their time or for advice given, as can be seen from our Client Charter.
UK Pensions and Non-Residents
By Spectrum IFA
This article is published on: 18th August 2014
A couple of things have come out of the UK government’s office recently. Both are important, but for some expatriates, one of these is going to have a bigger impact than the other.
The first was the result of the consultation on the UK pension reform, which was published in July (and we can now expect a Pensions Bill in the Autumn). The outcome is that not much has changed from what had already been proposed, which you can read about in my previous article at https://spectrum-ifa.com/proposed-uk-pension-changes/
However, a couple of things have been fine-tuned. For example, the age from which you will be able to take your total pension pot as cash on the grounds of triviality will be possible from age 55, rather than the current age 60. Also for those who still prefer the security of a lifetime annuity, the rules will be changed to allow a longer guarantee period than 10 years but of course, this will reduce the amount of the annuity at start.
One important point that has been clarified concerns pension transfers from Final Salary Schemes to Defined Contribution Schemes (DCS). We now know these will still be allowed, but only from those schemes that are funded. Therefore, members of unfunded public sector defined benefit schemes will not be allowed to transfer their benefits to a DCS. This may not appear to be an issue – after all who would want to transfer their pension benefits out of such schemes? In effect, the government – or in reality, the UK taxpayer – underwrites the cost of these pension schemes.
Well this brings me to the second ‘thing’ …….
……. non-residents could lose their UK tax-free allowance on UK taxable income.
For those of you who have not already picked up this news, this is something that could come into effect in April 2015. A consultation has been launched by the government with a deadline of 9th October for interested parties to respond.
For French residents, this concerns those who are receiving public sector pensions, UK property rental income and/or UK earnings. If it comes into effect, the result will be that for a basic rate UK tax payer, unless your average tax rate in France is at least 20%, then your combined UK and French tax bill will be higher. This is because the method that is used to give relief from double taxation in France, limits the amount of that relief to the amount of French tax attributable to such income. Based on the 2014 rates, for a couple in France this would mean that they have to have combined taxable income of at least €112,000 per annum or for a single person, at least €57,000. If you are below this level, then you would be affected.
My initial reaction to the above was that those with public sector pensions are being treated unfairly. They cannot transfer their pension benefits out of the current scheme and so are forced to be subject to UK tax with the possibility of paying up to £2,000 a year more (based on UK 2014-15 rates), but they are unlikely to get the full relief from France. However, thankfully, the UK government has recognised that as the public sector pensions are, in theory, only taxable in the UK, then it is quite likely that entitlement to the personal allowance will be maintained.
Sadly, not so for property rental income (or earnings), as the UK government considers that people will usually be also liable to tax in their country of residence. However, the method of the calculation used to give relief from double taxation is identical for all these three categories of income, which is based on taking in to account the gross amount of income (i.e. before UK tax deduction). Had the previous method of calculating the relief still been in operation, there would not be any potential issue, since the calculation used the amount of income after deduction of UK income tax.
The other change that is taking place in the UK that affects non-residents who own property is the introduction of capital gains tax for properties sold after April 2015. When combined with the potential increase in UK income tax on any property rental income, this makes holding property for investment purposes a lot less interesting.
Are you affected by these changes? If so, please feel free to contact me if you wish to have a confidential discussion to see if your situation can be improved.
Now is also a good time to mention that we are taking bookings for our Autumn client seminars, which will be taking place across France – “Le Tour de Finance – Bringing Experts to Expats”. Our industry experts will be presenting updates and outlooks on a broad range of subjects, including:
- Financial Markets
- Assurance Vie
- Pensions/QROPS
- Structured Investments
- French Tax issues
- Currency Exchange
The date for the local seminar is Friday, 10th October 2014 at the Domaine Gayda, 11300 Brugairolles. This is always a very popular event and so early booking is recommended.
But if you are reading this further afield, you may be interested in attending one of our other events:
Wednesday, 8th October – St Endréol, 83920, La Motte, the Var
Full details of all venues can be found on our website at Le Tour de Finance
Places for our seminars are limited and must be reserved, in advance. So if you would like to attend one of the events or you would anyway like to have a confidential discussion about any aspect of financial planning, please contact me either by e-mail at daphne.foulkes@spectrum-ifa.com or by telephone on 04 68 20 30 17.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.
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
Inheritance Planning in France
By Spectrum IFA
This article is published on: 15th August 2014
If you are resident in France, you are considered also to be domiciled in France for inheritance purposes and your worldwide estate becomes taxable in France, where the tax rates depend upon the relationship to your beneficiaries.
There are strict rules on succession and children are ‘protected heirs’ and so are entitled to inherit a proportion of each of their parents’ estates. For example, if you have one child, the proportion is half; two children, one-third each; and if you have three or more children, then three-quarters of your estate must be divided equally between them.
You are free to pass on the rest of your estate (the disposable part) to whoever you wish, through a French will and in the absence of making a will, if you have a surviving spouse, he/she would be entitled to 25% of your estate.
If you are not French resident, but own property in France, the same French inheritance rules and tax rates will apply in respect of that property – in effect, as if you were French resident.
You may also be considered domiciled in your ‘home country’ and if so, this could cause some confusion, since your home country may also have the right to charge succession taxes on your death. However, France has a number of Double Taxation Treaties (DTT) with other countries covering inheritance. In such a case, the DTT will set out the rules that apply (basically, ‘which’ country has the right to tax ‘what’ assets).
For example, 1963 DTT between France and the UK, specifies that the deceased’s total estate will be devolved and taxed in accordance with the person’s place of residence at the time of death, with the exception of any property assets that are sited in the other country.
Therefore, for a UK national who is resident in France, who has retained a property in the UK (and does not own any other property outside of France), the situation would be that:
- any French property, plus his/her total financial assets, would be devolved and taxed in accordance with French law; and
- the UK property would be devolved and taxed in accordance with UK law, although in theory, the French Notaire can take this asset into account when considering the fair distribution of all other assets to any ‘protected heirs’ (i.e. children).
If a DTT covering inheritance does not exist between France and the other country, with which the French resident person has an interest, this could result in double taxation, if the ‘home’ country also has the right to tax the person’s estate.
Hence, when people become French resident (or own French property), there are usually two issues:
- how to protect the survivor; and
- how to mitigate the potential French inheritance taxes for other beneficiaries.
At this point, there are probably many people saying “but the law has changed and now I can leave my assets to whoever I wish”.
This, of course, refers to the fact that legislation has been passed by the European Union, which will give non-French nationals, who are resident in France, the ability to choose the succession rules of their country of nationality, rather than being subject to the French rules. However, this will not be effective until 17th August 2015 and even at this stage, following analysis by the international legal profession, certain difficulties with the practical application have already been identified.
A big issue, however, is that when the EU legislation is in effect, this will not change the inheritance tax rules that apply. Therefore, even if we have the freedom to decide who inherits our estates, this will not reduce the potential inheritance tax liability. Hence, there will still be a need to shelter financial assets from French inheritance taxes.
As concerns protecting the survivor, currently, there are a number of solutions that exist in France. For example:
- You can change your marriage regime to one of “Communauté Universelle avec une clause d’attribution intégrale de la communauté au conjoint survivant”, so that all of your combined assets are held within a ‘community pot’. Subsequently, on the death of the first person, the assets in the ‘community pot’ are transferred to the survivor with little administration, thus, providing full protection for the survivor.
However, the downside of taking such a course of action is that your children will only have one set of inheritance allowances from the surviving parent (€100,000 per child) and so depending upon the value of your combined estates, this could result in a potential French inheritance tax bill. Therefore, an extra solution may be needed for financial assets, in order to mitigate the potential inheritance tax bill for your children or other beneficiaries.
In any event, this possibility is not usually open to couples who have children from previous relationships, since step-children may challenge such an arrangement.
- When purchasing property, it is possible to do this ‘en tontine’. Subsequently, on the death of the first person, it will be considered that the property has been owned by the survivor since the outset. However, this does not provide protection for financial assets and so an additional solution is needed.
Furthermore, a potential disadvantage of purchasing a property en tontine exists, if either (or both) of the couple have children and the natural parent of those children is not the survivor. This is because the step-children will no longer be protected heirs and so will not have any right to inherit a share of the property. Should the step-parent subsequently leave the disposable part of his/her estate to the step-children, they will be faced with a French inheritance tax bill of 60% above an allowance of €1,594 (2014 rate).
- You can make a ‘donation entré epoux’, which provides for the survivor to have outright ownership of the disposable part of the deceased’s estate and usufruit (life use) of the remainder.
For property, the ‘right of use’ is easily definable, since the survivor can live in the property, receive any rental income and make any alterations necessary. However, he/she cannot sell the property, without the agreement of the other ‘shareholders’ and would have to distribute their share of the proceeds to them, when the property is sold.
For financial investments, keeping the ‘right of use’ is complicated and often creates problems. There can be doubt as to whether the survivor can draw capital as well as income and what the ‘income’ actually signifies. Hence, it is preferable to find another solution for financial assets.
- It is possible to enter into a ‘family pact’ with your children. This is a complex arrangement, whereby the children effectively agree to give up their French inheritance rights, at least until the death of the survivor. However, this gives the survivor greater control over assets and keeps the step-children’s potential inheritance tax bill to a minimum.
Since giving up inheritance rights is considered to be such a serious matter in France, two Notaires would be involved in this process – one of whom would represent the children and thus, would be appointed by the Association of Notaires.
Whether or not any of the above solutions is the right one for you will depend upon your personal situation and, in effect, the value of your combined estates. In any event, all of the above must be carried out at the Notaire’s office and so it is very important to take the Notaire’s advice on the solution that is best for your particular situation.
As concerns potential inheritance taxes, fortunately, French inheritance tax between spouses (and partners who have entered into a Pacte Civil de Solidarité, commonly known as a PACS) was abolished in 2007, and so this is not an issue for the survivor.
Furthermore, the allowance between a parent and a child is reasonably generous at €100,000. However, at the other end of the scale, i.e. for ‘non-related persons’ (which includes step-children), the tax rate is 60% on anything inherited above €1,594.
In reality, there is little that can be done to mitigate any potential French inheritance tax bill in respect of property assets, once the standard French allowances have been used up. Hence, in such a situation, it becomes very important to shelter financial assets, as part of the inheritance planning solution.
This can be done by using Assurance Vie, which is highly beneficial for:
- protecting the survivor;
- mitigating the potential French inheritance taxes for your beneficiaries; and
- providing you with control over who receives your financial assets after death
For a quirk of historical reasoning, the benefits payable on death from an Assurance Vie investment, fall outside of your estate. For amounts invested before age 70, each beneficiary (whatever their relationship to you) is entitled to a tax-free allowance of €152,500 and taxation is limited to 20% on any benefit paid above this amount (although a higher tax rate of 31.25% applies for amounts exceeding €700,000 per beneficiary).
There is no limit to the number of beneficiaries that you can name. Hence, whatever your family situation, it is possible to pass on your capital to whoever you like, without them suffering excessive rates of French inheritance tax. Thus, the survivor can be protected and the capital can subsequently pass to your other beneficiaries, following the death of the survivor.
For amounts invested after age 70, the inheritance allowance for all of your beneficiaries is reduced to a total of €30,500 (plus the investment return on the total amount invested). In effect, therefore, it is only the amount invested that exceeds €30,500 that would be taxed at standard French inheritance tax rates.
Sadly, social contributions are now chargeable on any gain in the policy paid out as a death benefit. Despite this charge, this type of investment is still highly effective for inheritance planning, particularly since Assurance Vie is also personally tax-efficient, since the tax treatment is more favourable than most other types of French investments.
Inheritance planning is a highly specialised and complicated subject. Everyone’s family situation and level of wealth is different and it is very important to seek professional advice, so that the best course of action for you can be established.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action to mitigate the effects of French taxes.
The Spectrum IFA Group advisers do not charge any fees for their time or for advice given, as can be seen from our Client Charter
Enthusiastic feedback from ‘Le Tour de Finance’
By Amanda Johnson
This article is published on: 14th August 2014
For anyone who missed my recent seminars, I will be at The Deux Sevres Show on Saturday 20th September from 10.00am to answer any questions you may have. This ever popular event will be held at La Salle Aluna 21, Lac des Effres, 79130 Secondigny
The recent and successful Le Tour de Finance seminars covered many areas of finance expats encounter whilst living in France, including:
• Recent budget changes in UK pensions and the effect on expats – recent changes have opened up a number of new options, however, specialist advice is important to ensure you receive recommendations right for your situation
• The tax efficiency of your current investments – many people had tax effective investments whilst UK residents, but are these still best value now you live in France?
• Where should I pay my tax? – This is becoming an increasingly asked question due to where you & your family are actually domiciled. Whilst the UK & France have a double taxation treaty, your domicile can have an effect on social charges you are liable for.
• Regulation – Having a relationship with a company who are regulated in the country where you live in very important for financial peace of mind
• Value for Money – In today’s competitive economy, it is important to receive value for money in any advice you receive.
In addition to the above I can also talk to you about how you can plan for your pension now that you are working in France & how recent changes in social charges could impact your current investments & rental income you receive in France or the UK.
Whether you want to register for our newsletter, attend one of our road shows 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.
By popular demand Le Tour de Finance will be back in the autumn months. Please contact us here for further details.
Inheritance and expats living in France
By Spectrum IFA
This article is published on: 4th August 2014
Quite a few of my meetings with clients new and old recently have focussed on the thorny issue of inheritance. I think most of us are aware that this can cause problems for expatriates living in France. More recently some of us seem to think that the problem is about to go away. It isn’t.
What is true is that we will be able to adopt the laws of succession of the country of birth over the country of residence from August next year. What we have to realise though is that although this is indeed a relaxation of the strict Napoleonic succession code, there are no plans to change the taxation structure that goes with it. Whilst we will then be free to write estranged children (a sad but relatively common problem) out of our Wills, leaving substantial amounts of money or property to non-blood relatives will arouse glee in the ‘fisc’ as they will pick up 60% tax on the vast majority of it.
At this point many of you will be expecting me to veer off on my favourite tangent and harp on about how assurance vie can be the answer to all these ills, but I’m not going to. If that disappoints you, please feel free to drop me a line and I’ll rectify that situation.
Instead I’m going to stay on inheritance, because there are a few other aspects to this inevitable situation that some of you aren’t sure about. At present, children are ‘reserved heirs’. They enjoy special rights, and they have relatively generous tax free allowances that they can use from both parents. Rather unfairly though, step-children do not share these rights. If you die and leave an estate to your stepson or stepdaughter, he or she will pay the full tax rates, with no child tax free allowance.
Another inheritance issue that trips some of us up is what happens when we inherit from our own relatives. Succession tax is payable by a French resident who receives a gift or inheritance and who has been resident in France for at least 6 out of the 10 previous tax years. That’s the bad news. The good news is that under specific provisions laid down by the UK/France Double Taxation Treaty, we are exempt from this tax law as long as the relative was not also a French resident. So if we inherit from a parent, or in fact from anyone who lived in the UK, we do not have to declare this for tax purposes in France. If that benefactor was a French resident though, be prepared to fork out a substantial amount in succession tax.
These are just three of the common areas of confusion that I come across regularly in my discussions with clients. There are many more complicated issues that need to be addressed if you want to have a trouble free transfer of assets when you or your loved ones die. This can be a self-educating process, especially if your family circumstances are relatively straightforward. If not, the best person to approach to establish the facts is your notaire. If your French isn’t up to it, find a notaire who speaks English. There are plenty of them about.
In many cases your financial adviser should be your next port of call, specifically to put in place financial strategies that can help circumnavigate many of the problems. Assurance vie will probably figure highly in this process. It is the ‘aspirin’ that cures many a financial headache.