Planning for the yachting season ahead
By Peter Brooke
This article is published on: 22nd February 2016
You spend much of your professional lives working hard for other people; this season I want to challenge you to do one thing for you and your future every month.
MARCH (i.e. now):
Consolidate your bank accounts – you don’t need them all.Have an account in the currency in which you are paid and another in any other currency you regularly use. You don’t, need lots of accounts, but make sure your total balance is below the compensation limits for the jurisdiction in which you hold the account .
April:
Don’t spend money just moving it around, open a currency broker account. If you need to move money from one currency to another, don’t use your bank, your currency broker can save you a small fortune on exchange rates and fees.
MAY:
Invest in yourself! What are you going to do at the end of the season? Consider now what your next set of exams will be and when you can do them. Put money aside for fees and living costs. Check your visas and passports if you are crossing to the U.S. later in the year. And start a diary (see November…).
AUGUST:
This is the really busy time; stop and consider your longer term future. How long do you want to stay in yachting? What do you want to do after yachting?What do you want to get from yachting (personally and financially)?
SEPTEMBER:
The season is calming down – are you really covered? Time to check exactly what health insurance you have on board and if there is any accidental injury or even death in service protection for you and your beneficiaries while you work. When you know, tell someone at home so they can claim on your behalf if necessary.
OCTOBER:
Cash is no longer king. At the end of your season you may have a pot of cash that you can’t get into your bank (due to strict money laundering rules). Negotiate to have tips paid directly with your salary into your bank account, keeping only the petty cash required. Many Captains will do this.
NOVEMBER:
Tax residency is a matter of fact. Get organised and keep a diary of your travels. Yacht crew are “approached” by various tax authorities that believe you might be a resident. It’s not down to them to prove that you are a resident in their country, it’s down to you to prove you’re not. Understand the residency laws of the countries where you are most likely to become a resident, then keep a diary and flight ticket stubs, to support your case.
DECEMBER:
If you’ll be in the yachting industry for more than two or three years, seriously consider saving for your future, Your friends on land are paying tax and social security, which will give them something at retirement – are you? It’s up to all crew to put something aside (I suggest at least 25 percent of salary) while they’re in the industry to try and secure their financial wellbeing. The million dollar rule – to retire on an income of $/€3,OOO per month in 15 years, you will need approximately $/€1.1million in assets.
Rendita catastale
By Gareth Horsfall
This article is published on: 10th November 2015
I admit it! I have been confused for years about the rendita catastale. I have never been sure about its role in the economy and how it benefited the individual or economy. Until now! (Care of Bloomberg online)
So, the story goes something like this:
The rendita catastale represents the amount of ‘theoretical rent’ that a householder pays him/herself as a measure of economic consumption.
In other words:
If a householder owns their house outright, i.e no mortgage or other debt, then that person is actually a ‘imputed’ consumer and investor of the ‘invisible’ rent money that they would have received should they be renting a similar house. This money is then assumed to be spent and go back into the economy.
And this is considered a growing financial benefit that property owners enjoy from not having to pay rent.
So, whilst the financial crisis shrank the economy more than 8 percent and unemployment doubled in the seven years of the crisis, property, proportionately, made up more of the gross domestic product. The weighting of property in Italian GDP jumped 2.1% from 2007 despite falls in property prices and transactions. (which gives you an idea of how big the falls were in other parts of the economy).
And given that the financial benefit from housing, i.e the rendita catastale, is taking up a larger proportion of a property owners income, then it comes as no surprise that Renzi has recently promised to abolish IMU on the prima casa from 2016. This also seems to imply that Renzi realises that Italians homeowner spending habits are more important than foreign buyers as a means to sustain property prices.
The Italian economy strongly relies on home ownership. Just by residing either in debt free housing or paying no rent (living in family houses) or a paying a below-market rent, Italians contribute to more than 8 percent of the nation’s GDP, up from about 7 percent in 2007. In a country where more than 73 percent of the population live in owned residences, this is a valuable contribution to economic growth.
Disclaimer
The views expressed here are my own. They are not necessarily shared by The Spectrum IFA group or any other company named or implied. They are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities or companies are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities.
The UK’s future membership of the EU
By Spectrum IFA
This article is published on: 13th October 2015
As the media hype heats up over the question of the UK’s future membership of the EU, clients are already asking what will happen if the outcome of the referendum is to leave the EU?
The simple answer is that we do not really know because a country has never left the EU. What we do know is, as British expatriates ourselves, we will be affected in the same way as our clients.
The more complicated answer is that it will depend upon whether it is a ‘soft exit’ or a ‘hard exit’.
A soft exit would be, for example, remaining as an EEA State (in the same way as Norway, Iceland and Lichtenstein). As such, the UK would still have access to the single European market and full freedom of trade within the EU. However, in addition, the UK would be free to negotiate bilateral trade agreements with countries outside of the EU, something that is not possible with full EU membership. The UK would still have to adhere to EU product and financial regulations, as well as social and employment rules. EU budget contributions would still be required, although at a reduced level. Ability to restrict inward EU migration would not be allowed.
A ‘hard exit’ would take the UK outside of the EEA, resulting in it having no automatic access to trade within the EU, but it could continue to negotiate trade agreements with non-EU countries. There would be no more EU budget contributions and also no requirement to adhere to EU Regulations. Inward EU migration could be restricted.
With a ‘hard exit’, as British expatriates living in France, we would need to apply for a Carte de Séjour, but if already resident in France for 10 years, may be granted a Carte de Résidence. Certificates S1 would become a thing of the past and so British expatriates would have to pay cotisations for French health cover. Equally, EU nationals living in the UK, would no longer have an automatic right to live and work there.
The referendum is to take place by the end of 2017, but it is more likely now that it will be in 2016. What we can be certain about is that in the period leading up to the referendum, there will be uncertainty – in capital markets (particularly in the UK) and in currency markets (Sterling is likely to be under pressure).
As if the referendum was not enough to think about, we also have to continue playing the guessing game with central bank policy! It was widely expected that the Fed would start to increase US interest rates in September, but that was not to be. Whilst an increase is not entirely ruled out before the end of this year, no-one can be certain. It is unlikely that the UK will move on interest rates before the US.
In times of such uncertainty, it is more important than ever to seek advice on how to protect your wealth. At the Spectrum IFA Group we have a range of solutions to offer clients, depending upon attitude to investment risk and objectives. For example, have a range of capital protected investments and other low volatility multi-assets funds available. Hence, clients’ portfolios can easily be adjusted to protect their wealth, as and when necessary, something that is particularly appropriate during times of volatile markets.
Even when markets are not volatile, the benefits of diversification gained through investing in global multi-asset portfolios cannot be overstated. If this is combined with using investment management firms that have the size and capability to carry out extensive research into global markets, and investment risk is managed effectively, this considerably increases the chances of the clients’ investments performing better than the average over the medium to long-term.
Some people may be afraid to invest in capital markets during times of uncertainty. However, sitting with large amounts of cash in a bank is not risk-free. Apart from institutional risk, there is the real enemy of inflation, which can erode the real purchasing power of your capital, particularly since interest rates continue at ‘all-time lows’. Holding cash in the bank should really only be for short-term needs which of course includes any short-term capital projects that you might have planned, as well as a cushion for emergencies. Bank deposits are not usually appropriate for medium to long-term investment.
The investment solutions that we recommend to our clients are all carried out within tax-efficient products, which are also highly beneficial for inheritance planning in France. Everyone is different and that is why it is very important that we carry out a full review of a prospective client’s situation to find the right solution for them. It is equally important to ensure that this is kept under review and to not be afraid to make adjustments, when necessary.
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 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
The EU Succession Regulations
By Spectrum IFA
This article is published on: 20th July 2015
What a month it has been since I wrote my last article. The Greek crisis has waxed and waned and as the prospect of increases in UK interest rates comes closer, now the Sterling Euro exchange rate has hit new highs. All of this while the temperatures continue to soar in France and the effects of the canicule are felt!
August is almost upon us and this means that the long-awaited EU Succession Regulations will come into effect. From that point, as French residents, we will be able to opt for the succession rules of our country of nationality to apply (whether or not that country is within the EU). If you do nothing, the default position is that the succession rules of your country of habitual residence will apply. However, regardless of which country’s succession rules are to apply, this will not change the tax situation. French succession taxes will still be due, which can be up to 60%, depending upon your relationship to your beneficiaries.
I am not going to go into the detail of the EU Succession Regulations here, as I have done this before and so I invite you to read my article on this at: spectrum-ifa.com/eu-succession-regulations-the-perfect-solution
As the months have passed since writing that article, I have discussed the implications of the Regulations with several legal professionals who operate at an international level and so they are already highly experienced in dealing with cross-border succession situations. Unfortunately, the further clarification on the practical application of the Regulations that we were hoping for has not appeared and so still we can only wait for the results of actual cases.
What is clear though is that if you elect the succession rules of your country of nationality, then your French property and any other assets that you own would be administered by a French notaire trying to apply another country’s law and this is likely to cause complications, delays, additional expenses and delays. So I, like many other professionals, hold the view that if there is a tried and tested ‘French way’ to achieve your objectives, then this should still be used. The ‘French way’ is another subject that I have written about in detail and the full article can be read at: spectrum-ifa.com/inheritance-planning-in-france
There will be cases where the EU Succession Regulations will be welcome for some couples. Typically, this might include situations where children are estranged from parents or step-children just will not accept the step-parent, regardless of the length of the relationship. The Regulations will be a relief for couples in such situations, as they will be able to circumvent the French forced succession rules, but they will still need to address the taxation issues that may occur. As concerns financial assets, this is an area where we can help.
Everyone’s situation is different and this is why it is very important
to seek professional advice on this subject.
Are you concerned about the EU Succession Regulations and how this affects you? If you would like to have a confidential discussion about this please contact me from the contact box below.
Why it Pays to Make a Spanish Will as an expat
By Jonathan Goodman
This article is published on: 15th June 2015
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While you are enjoying your new life and possibly a new home in Spain, it is understandable that you might not want to think too long or too hard about the future, particularly about matters pertaining to your Will and inheritance issues for your children and heirs. But this subject needs to be covered and fully understood sooner rather than later. There are three central reasons for making a Spanish Will: One – It avoids time-consuming and expensive legal issues that your family and heirs will have to resolve. You can – and should – make a separate Will to dispose of any assets located outside of Spain. A British Will, for example, has no bearing on your Spanish estate. Two – Spaniards have to divide their assets equally among their family and heirs, and leave two-thirds of it all to their children. As an expat, you are exempt from this ruling and you can bequeath your assets to whomever you wish. Your estate will, however, be subject to Spanish inheritance tax, which is high when left by non-residents to non-relatives. In addition, expats resident in Spain are subject to the same taxes on any of their worldwide estate, too. Therefore, making a Will allows you to navigate these various taxes at your discretion. Three – Your estate can become eligible to a 95 per cent reduction in inheritance tax. This reduction only applies to the first €120,000, but is not available to non-residents, so bear this in mind when drawing up a Will. The Spectrum IFA Group in Spain are delighted to be able offer their clients a 15% discount when using the services of ‘AvaLaw‘, who over the last years have assisted clients from almost 50 different countries. |
The story you are about to read is true; only the names have been changed to protect the innocent… Mr. Rainyday and Mr. Blueskies were catching up over a beer in Barcelona on a sunny Friday morning. Mr. Rainyday had barely taken a sip of his beer before he was on his pet topic — complaining about Spain, his and Mr. Blueskies’ adopted home as of a few years ago. ‘This time its dad’s flat in Andalucía. It’s over a year and a half since his funeral, and I’ve only just got it transferred to my name. Plus, it’s cost me a fortune. There’s no way it’d be such a hassle back home. It’s a total scam!’ ‘That’s funny,’ said Mr. Blueskies, ‘My dad died around the same time, had an identical apartment in the same building as your dad, and it only took us four months to get the apartment registered in my and my mother’s name. And, if I remember correctly, it didn’t cost that much, either.’ ‘Really?’ asked Mr. Rainyday, ‘How’d you manage that?’ ‘I don’t know. It all seemed pretty straightforward. Our advisor took care of everything for my dad. Was there a problem with your father’s Spanish will or something?’ ‘Will? What will? Dad didn’t have one, but I thought you didn’t even need one in Spain?’ ‘You don’t need one, but having one makes things a lot easier and cheaper for your heirs,’ said Mr. Blueskies. ‘Since my father had a Spanish will, I did not have to sworn-translate and legalize tons of documents, there were no surprises regarding the applicable law, no need to get certificates regarding which testament is valid according to the foreign law applicable to the inheritance, no need to pay lawyers to deal with all the unnecessary bureaucracy in all the countries, and no need to wait for a year or two to get the title of the apartment…’ ‘I see…’ said Mr. Rainyday. ‘Anyway, what outraged me even worse than the bureaucracy, was paying the 60.000 euros of inheritance tax for the property worth 300.000 euros.’ ‘Wow’, exclaimed Mr. Blueskies, ‘You paid that much, did you! We did not pay any taxes for inheriting my dad’s flat, since Roser advised my father to leave in his will 50% of the flat to my mother and 50% to me, so that we both could take advantage of the personal tax exemption of 175.000 euros that Andalucía had for all of us who were residing over there at that moment. What a difference, eeh, with some simple inheritance planning?’ Since Mr. Rainyday looked really sour, Mr. Blueskies changed the topic and started to speculate whether Barça is going to bring home all the 3 titles this season… |
Clients of The Spectrum IFA Group are eligible for up to a 15% discount
on making a Will with AvaLaw. Contact us now for further information
You can’t please all of the people all of the time
By Spectrum IFA
This article is published on: 11th June 2015
It’s a sad but true fact that you can’t please all of the people all of the time. While most of us dance a little jig each time the sterling pops its head over the 1.40 mark (however briefly!), others wince and reach for their calculators, working out how much less they are now worth in sterling terms. For various reasons, as we have discussed before, people decide to ‘go home’. The very fact that they describe it in those terms probably makes them all the more likely to take that decision in the first place, but the fact is that the older we get, the more compelling the argument can become to return to our roots.
There are currently two main problems for those who come to that decision today. The first is the exchange rate, and the second is the housing market. How unfair is it that many of us came to France on the back of a strong pound, then congratulated ourselves when it collapsed, only to find that when we need it to stay weak, it bounces back to bite us where it hurts? And, to compound matters, our cherished piece of French real estate turns out to be worth a fraction of our own valuation. I don’t think this is particularly a French issue though, unless we (surely not?) were persuaded to pay more than the property was worth in the first place. I learned many years ago that if you think you might want to move home at some time in the future, plan ahead. Don’t wait until you want/need to sell and bide your time. Advertise early, and wait for that elusive buyer who really wants to buy your home. Easier said than done though, I must confess, although I have in the past been successful in selling a ‘quirky’ house on this basis, and buying a much more sellable property, purely to put myself into a more flexible situation where I knew I could move quickly if I needed to. Even then some ego inflated politicians started a war and held up our move to France for quite a few months.
No, you can’t please all the people all the time, but what you can do is try to give them the best advice at all times. If you get that right, then major upheavals such as moving back ’home’ can be made less of a trial. A good example is investment advice. I estimate that currently around 5% of my clients are in the process of moving back to the UK, or are thinking about it. I know for a fact that all of them are happy that they took my advice to invest in what I class as ‘Expat Assurance Vie’ policies. I call them this because I know full well that they are designed for and aimed at the expatriate market in France. One major advantage is that they are completely portable. It is easy to convert the policy to a standard UK investment bond. You could even have stayed invested in sterling, but if you had switched to Euro, you can switch back. If the current exchange rate deters you, there is nothing to stop you going back to the UK with your investments still in Euros, to be converted when the rate goes back down (as it surely will).
In part I blame social media for this new type of expat existence. Originally, when you moved abroad, you kept in touch by mail. Good old fashioned post. If something of note happened, either abroad or in the UK, you would write to your family and tell them about it. If it was very urgent, you’d phone, but that was expensive. Nowadays little Jimmy in Tonbridge Wells starts teething and the whole world knows about it in minutes. Don’t get me wrong, I’m not a complete dinosaur when it comes to these matters. I have a Facebook page! But I don’t really know how to use it though. I’ve never found my ‘Wall’, and I’ve never enjoyed being poked. As for Twitter, I’ve never understood the rationale behind it, never mind how to use it. I thought retweeting was military code for a strategic withdrawal.
I suppose it all has its uses, but it makes the world a more volatile place. Sometimes you can just have too much information. Sometimes it’s better to let someone else take over and do ‘stuff’ for you.
Maybe a financial adviser for example…
Offshore Disclosures Facility
By Peter Brooke
This article is published on: 25th May 2015
This month I had the opportunity to sit down with Patrick Maflin from Marine Accounts for a Q&A session on the Offshore Disclosures Facility.
Patrick, Firstly what is the Offshore Disclosures Facility?
The Offshore Disclosures facility is an amnesty for UK citizens who have undeclared offshore earnings. It is directly aimed at targeting offshore tax evasion. The G20 have now opted similar schemes such as the Offshore Disclosures Program (ODP) in the US & Project Let’s Do It in Australia.
What is offshore evasion?
Offshore evasion is using another jurisdiction’s systems with the objective of evading UK tax. This includes moving, not declaring or hiding (via complex offshore structures) any income, gains or assets out of the site of HMRC.
When does the amnesty end & what happens if I do not declare?
The UK disclosure facility ends on 30th September 2016. Individuals who choose not to declare their earnings can face fines of up to 200% of the tax evaded and possible imprisonment as it is now a criminal offence. Project Let’s Do It in Australia came to an end in December 2014 and the IRS have not stated when ODP will end.
How can I declare my earnings through the facility and what are the benefits?
UK seafarers can declare their earnings under the Seafarers Earnings Deduction (SED) providing that they spend more than 183 days out of the UK and work onboard a ship. If you declare now before becoming subject to investigation you will not face fines and will not have to pay tax on your earnings. However if you owe tax through work days in the UK or not qualifying for the SED exemption you will only pay 10% on top of your tax bill as opposed to 200%.
What happens if HMRC contact me first?
If they do contact you first you are faced with possibility of a tax investigation into your financial affairs and will not qualify for any penalties at the lowest rates and will have to pay the taxes you owe for up to 20 years. You could also face criminal prosecution.
What if I move my funds to the Cayman Islands, surely it is safe there?
The UK signed ten more automatic exchange agreements in 2014 including many of the classic ‘offshore centres’. The new global standard developed by the OECD has been endorsed by the G20 and now 44 jurisdictions in total. This will lead to greater tax transparency and the ability for governments to clamp down on those who evade tax.
What exactly will the new global exchange mean? What type of information will the G20 access?
The 44 jurisdictions are going to share if you have a bank, investment or custodial account and will be able to see your name, address, account number, balance and income.
When I browse the yachting forums I still see crew asking where the best place is to open an account to avoid paying tax! What do you think of this?
It surprises me that people choose to openly broadcast that they are looking to avoid paying tax and that they believe that today with the open exchange of information that this is still possible and the right course of action.
HMRC contacted over 20,000 people in 2013 about their offshore assets. In 2014 offshore banks in the 44 jurisdictions started collecting information about UK & US residents. This information will reach HMRC by the start of 2016.
Are Offshore accounts still permitted under the Offshore Disclosures Facility?
Of course, there is nothing wrong with having offshore accounts & investments as long as you declare the income and gains on your tax return. This is not designed to stop people banking offshore, but to allow individuals to bring their tax affairs up to date if they have worldwide undeclared income. The principle benefits of using an offshore account is currency flexibility.
This article is for information only and should not be considered as advice.
Misinformation, not just a problem for politicians?
By Spectrum IFA
This article is published on: 14th May 2015
Oh my, what to talk about this week? Whatever you do, don’t invest in opinion polls. Amazingly, we already have a new government; non-committal about staying in Europe, but firm on staying out of the Euro, and we have an EU country, Greece, firmly committed to staying in Europe, but possibly about to be forced to leave the Euro due to profligate bankruptcy. Actually not only bankruptcy, but the next stage on from that; running out of friends, or in fact anyone, who will now lend them money. This is beginning to look like a one way street for the Euro, but beware. Nothing is ever as clear cut as it seems.
Misinformation. Clearly a problem for politicians, but a big problem for us too. What I want to talk about today is the worrying number of new clients that I’ve seen so far this year who have previously accepted financial advice that is clearly flawed. If you took advice on investments before you came to France, or maybe have sought advice from unregulated sources since you got here, you may well be the proud owner of an offshore bond. If this sounds like you, then please keep on reading. You have the wrong investment for successful tax efficiency in France, and it can have severe consequences.
Don’t get me wrong, there is nothing illegal about holding a Jersey or Isle of Man domiciled bond in France, as long as you declare it to the ‘fisc’, but you may well be in for a nasty surprise when you start to draw money as regular income or one-off cash injections. And whatever you do, don’t die. Not that it will bother you too much at this point, but it will only add to the consternation of your beneficiaries if your local tax office turns its nose up at your non-European, definitely non assurance vie bond.
If your bond is not a true assurance vie, it will not be set up to jump through the tax hoops that the French tax system presents. How do you tell if your bond will be able to jump through the hoops? Well, you’re off to a good start if you talk to a regulated and approved adviser registered in France, who offers you an assurance vie. This must be compliant. Anything else, and you should start to worry. There are a few ‘litmus’ tests you can use. The first is elementary geography. Is your bond issued in Europe? If not, forget it. You do not have an assurance vie, or anything like it. Secondly, ask your bond provider if he will be able to give you certified tax information to enable you to make your French tax return. Unless you can be completely satisfied that you will be told exactly how much of your withdrawal is taxable, in Euros (even if the bond is in sterling), you have a problem, and you have the wrong bond. You will pay more tax on the gain and you will lose out on various other benefits than if you had structured the exact same underlying investments inside an assurance vie. You have, in short, been badly advised. This is not necessarily through deceit or bad practice, but almost certainly through ignorance; both of the French financial system and of its products. Most likely the advice will have come from a UK IFA trying to keep a grip on a client moving abroad, or an international IFA operating outside of his usual area.
Help is available. Spectrum financial advisers are registered and regulated in the countries in which we work. Unlike back in the UK, we do not charge for our advice or time. Taking advice from registered advisers is a no-lose situation. You will get good advice; you won’t be hassled or coerced into doing anything at all that you’re not entirely comfortable with, and you won’t be charged.
A good way to meet advisers is to attend a financial seminar, such as those currently taking place under the ‘Le Tour de Finance’ banner.
You must, in short, satisfy yourself that your financial adviser is qualified to advise you about the conditions that exist in the financial regime in which you are going to live and pay taxes. There are various loopholes that allow non France-based IFAs to operate here from a number of European countries. Please make sure that you choose an IFA who lives and works in your local community.
You have two such advisers writing for the ‘Flyer’ at the present time. Why on earth would anyone in their right mind rely on an IFA in Chipping Sodbury or Crete to advise them on the most important financial decisions of their lives?
French social charges on worldwide investment income
By Spectrum IFA
This article is published on: 1st April 2015
On 26th February 2015, the European Court of Justice (ECJ) made a very important ruling concerning the application of French social charges (prélèvement sociaux). These charges are levied to fund certain social security benefits in France, as well as the compulsory sickness insurance schemes.
If you are resident in France, you are required to pay the social charges on all your worldwide investment income and gains and the current rate is 15.5%. However, the payment of these social charges does not actually give you any automatic right to French social security benefits and health cover.
In fact, many early retirees have been refused health cover when their Certificate S1, issued by the UK, has expired, if they have not been resident in France for at least five years. Since having adequate health cover is a condition of French residency, such people have either had to work in France – perhaps even setting up their own business – or they have been obliged to take out private health cover.
It is clear that France considers social charges on investment income and gains as an additional tax, rather than a social security contribution, since the payment does not provide any automatic rights to social security benefits and health cover. However, it is the French Code de Sécurité Sociale, rather than the Code Générale des Impôts, which lays down the conditions under which these social charges are payable in France.
Thankfully, the ECJ has reached a different conclusion. In its determination, the ECJ decided that France’s social charges have a sufficient link with the financing of the country’s social security system and benefits. In addition, there should be no distinction made between those charges payable on earnings and those payable on investment income and gains.
EU Regulation 1408/71 deals with the application of social security schemes to people moving within the European Union. The Regulation provides that people should be subject to the social security legislation of only one Member State (except for very limited situations). To have anything different could lead to unequal treatment between Members States and their citizens, which would be contrary to EU principles.
Therefore, for any French resident who is the holder of a Certificate S1 that has been issued by another Member State, this means that he/she is subject to the social security legislation of the issuing State. As such, the ECJ has ruled that France cannot impose an obligation on the person to pay social charges to France, as this would result in them being subject to the social security legislation of more than one Member State. The ECJ has also ruled that this principle applies whether or not the insured person actually pays social security contributions on the income/gains concerned in the Member State that insures the person.
Since 2012, non-residents have also had to pay the social charges on any French property rental income and on any gains arising when they have sold the French property. There is general opinion now that the ECJ ruling should also bring this to an end, at least for residents who are insured in another EU State.
EU legislation overrides the internal legislation of Member States. Notwithstanding this, we will still need to wait for the French government’s response to this ECJ ruling. Arising out of this, if France accepts the ruling, it will need to amend its own internal codes to ensure compliance with the ruling.
In the meantime, taxpayers can make an application for a refund of social charges paid in 2013 and 2014, by filing a claim with their local tax office before 31st December 2015. In addition, taxpayers may also wish to refer to the ECJ ruling when submitting their French tax returns for this year, if they believe that they are affected.
On the subject of French tax returns, these are due by 19th May 2015, if submitting a paper return or if submitting on-line by 26th May 2015 for departments 01 to 19, by 2nd June 2015 for departments 20 to 49 and by 9th June 2015 for other departments. According to the ECB website, the average exchange rate of Sterling to Euros for 2014 is 0.80612.
For those of you who came to live in France during 2014, then you will need to make your first French tax declaration and declare all your worldwide income and gains. This includes income and gains that might be tax-free in another country, for example, UK ISAs, premium bond winnings and Pension Commencement Lump Sums, which are all taxable in France.
Even if the income is taxable in another country, for example a UK government pension 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.
It is also very important to declare the existence of all foreign bank accounts (whatever the amount in the account) and life assurance policies taken out with companies outside of France. Failure to do so can result in a penalty of €1,500 for each undisclosed bank account. However, if the total value of all unreported accounts is €50,000 or more, then the penalty is increased to 5% of the total value of the accounts, if this results in a greater amount. The same penalties also apply for undeclared foreign life assurance contracts.
Pensions – I cannot pass by without saying something on this. I have personally become so fed up with all of the UK changes that I have now taken the decision to transfer all of my own UK pension benefits into a QROPS. I have chosen the well-regulated jurisdiction of Malta and I feel that I am in control of my own retirement planning again. In short, I feel that I will now have a pension for life and not just for Christmas or for the next session of the UK parliament.
With days to go before the reform takes place in the UK, if you are affected, do you understand what this means for you? If not, would you like to have a confidential discussion with me about your situation?
Pensions is one of the major subjects that we are also covering at our client seminars this year, as well as EU Succession Regulations, French taxation, health insurance and currency exchange. We are already taking bookings for Le Tour de Finance 2015 and this is a perfect opportunity to come along and meet industry experts on a broad range of financial matters that are of interest to expatriates. The local events are taking place at:
Perpignan – 19th May
Bize-Minervois – 20th May
Montagnac – 21st May
Le Tour de Finance is an increasingly popular event and early booking is recommended. So if you would like to attend one of these events, please contact me to reserve your places.
Whether or not you are able to come to one of our events, if you would like to have a confidential discussion about pensions, investments and/or inheritance planning, using tax-efficient solutions, please contact me either by telephone on 04 68 20 30 17 or by e-mail at daphne.foulkes@spectrum-ifa.com.