By Peter Brooke
This article is published on: 9th May 2023
The tax season is underway and whilst those who are declaring for the first time by paper have until 22nd May to complete their returns, most other people in most departments have until early June. Of course many people want to get it done as soon as possible. Now that all the forms are available, which can be downloaded here from the French Government website, you can have a clearer idea of how to declare.
If you have employed someone to do your tax return, the chances are you have already sent off all your information. However if you want to have a go at doing your own tax return, then here are some tips for this year!
First tip – I would highly recommend investing in the Income Tax Return guide from the Connexion magazine – which can be bought online here.
Please note that we, at Spectrum, are not accountants and do not complete tax returns for our clients, in fact I personally find the process as complicated as I am sure you do.
Hopefully some of these tips will help – of course if you do need help then I would recommend speaking to the team at French Tax Online who have a lot of information and experience with French Tax returns: https://www.frenchtaxonline.com/
Everything is declarable, not everything will be taxable!
1. Get organised first – have all your information together before you start. If you are using your Self Assessment Tax Return from the UK, make sure you decide which number you are using (April 22 or April 23) and stick to that method for UK based income. If you suddenly change and start taking the figures from your bank account then you will be double taxed on the first four months of the year. Collect all your statements, payslips, tax certificates together in the one place and note down the figures for all your sources of income and the exchange rate at the date of payment (or the annual average)
2.You must declare ALL of your worldwide income. French income is declared on the main tax form (called the 2042) and put any foreign sourced income on the 2047 form. You need to declare all of your non-French bank accounts on the 3916 form. If you are doing the return for the first time on paper you will need a paper copy of all these forms
You will also need the 2042 C form as that is where you will find boxes 8SH and 8SI that you must tick if you have an S1 certificate so that social charges aren’t charged on your pensions and that the reduced rate of social charges of 7.5% as opposed to 17.2% are charged on any investment income
All of the forms can be downloaded here from the French Government website
3. Healthcare: If you are declaring online you need to tick box 8SH and 8SI to inform the French authorities that you are covered for your healthcare by another system of the EU (including the UK)
4. Foreign Bank accounts and Assurance Vie (AV): If you are declaring online you need to tick box 8TT (for Dublin or Luxembourg AV) and 8UU (for non French bank accounts) in order to create the 3916 form which needs to be completed with the details of these accounts. If you are declaring on the paper form, these boxes are at the bottom of the main 2042 form. If you are declaring an assurance vie you will need to have the value (in euros) of the account as at 1st January 2022, you should receive statements from your AV provider with this information during April and May each year
5. Foreign sourced income must go on the 2047 form (the pink one). Most foreign pensions and salaries go in section 1 of this form but UK salaries, UK rental income, UK Government pensions, which are all declared in France but given a tax credit equivalent to the tax that would have been paid in France all have to go into Section 6 of this form in order to get the tax credit (box 8TK on the 2042 form)
6. Don’t forget any charitable donations that you made in 2022. French based charities send you a tax certificate, so you can use this to enter the correct amount
7. Don’t forget the kids! The tax credit for child care costs for children under 6 (born after 1st January 2016) have increased from €2300 to €3500 per child and you get 50% of this amount. This is for expenses for a nanny (nounou), nursery, after school care and holiday club. If however your child is now over 6 but you still have someone to collect them from school, this is counted as a home help tax credit (see next point)
8. Tax credits for home help. If you have a gardener or cleaner or have had some other home help in 2022, and you haven’t already received the tax credit automatically, you can declare these amounts on the 2042 RICI form here You are allowed at tax credit of 50% of any expenses up to a maximum of €12,000
Not everything has to be 100% accurate.
If you get close to the deadline, just submit your tax return as it is, you can amend the tax return, without penalties, through the correction service which will open at the beginning of August.
If you are receiving income in any currency other than Euros you need to convert it to Euros for your declaration.
You should use the exchange rate on the day the you received the income into your account and daily rates are available here:
If you don’t have access to the accurate data it is possible to use an average rate for the year which is shown in the Connexion guide as £1 = €1.158
By Katriona Murray-Platon
This article is published on: 12th April 2023
April hails the beginning of tax season. For those eager bunnies who want to get on with it as soon as possible please note that the tax season will begin on 13th April with the online service being available and the new 2022 income tax forms available to be printed online or found at the tax offices from this date.
If you do want to get it over and done with, that is understandable, but actually this year you have a bit more time to get it done as most of the submission deadlines are either towards the end of May or even beginning of June.
Those submitting their first paper returns have until Monday 22nd May 2023 at 11.59pm, as attested by the postal stamp. The other dates for the online submissions are as follows:
At the time of writing and until the 13th April, I can’t comment on any changes in the tax forms but in my next Ezine I will give more information about any specific aspects of the 2022 declarations. You can always download our free tax guide HERE and please also look at my adviser page for previous articles on tax matters.
As tax residents in France, you have to declare your worldwide income irrespective of where it comes from. Not everything is taxable, depending on the provisions of the double tax treaty, but everything is declarable. One of the things you do not need to worry about is any French sourced income like salaries, French pensions, French bank interest. This information is generally already completed on your tax return so you just need to check that it is correct. You only need to declare your foreign bank accounts on the 3916 form and not any French accounts or investments.
Tax offices often get confused about what foreign income gets a tax credit under the double tax treaty and what gets a tax credit because it was actually taxed in the country in question whereas, very often, because the income falls under the tax threshold the income wasn’t actually taxed. Well the French Administrative court, the Conseil d’Etat has just confirmed in a decision dated 20th March 2023 (https://www.legifrance.gouv.fr/) that where a double tax treaty grants a tax credit on this income, this is not subject to whether or not the income has in fact been taxed in the country from which it originated.
Finally, an additional energy cheque of an amount of between €48 and €277 depending on income, will be sent out and can be used until 31st March 2024 to pay gas or electricity bills. This is in addition to the exceptional energy cheque and the wood and fuel cheque that have been sent out already.
I will be available for meetings except for the week commencing 17th April as I will be away with my family. But there are still plenty of slots for meetings in the second and last week of April. Please do get in touch with any tax or financial questions.
By Amanda Johnson
This article is published on: 21st March 2023
Assurance Vie in France – In most countries, tax-efficient savings and investment schemes exist with the aim of encouraging people to save for the medium and long-term so they don’t become a burden on the state.
However, when we become resident in France the tax-efficiency that we enjoyed from our home schemes is usually lost. This is because, as a French resident, you are liable to French taxes on all your worldwide income and gains, except for anything that might be exempted by the terms of a Double Taxation Treaty.
Even if certain income is exempt from French taxes, it is usually the case that this exempt income must still be declared in France and will be included with your other income when calculating your French income tax liability. The fundamental point to note is that including such exempt income has the effect of increasing the rate at which other sources of income are taxed in France, including investment income.
In France, there are several tax-free accounts available for short-term savings such as:
For medium to long-term investments (as opposed to savings), there is one product that stands head and shoulders above the rest and that is an Assurance Vie
An Assurance Vie (AV) is an insurance-based investment product. It can be as simple or as complicated as you wish to make it. Think of it as that old shoe-box that you keep your documents in, or maybe that fireproof metal cabinet for certificates and the like. Old and battered it may be, but an AV has some rather special properties:
Millions of French people use the AV as their standard form of savings and investments and many billions of Euros are invested this way via French banks and insurance companies. In addition, there is a much smaller group of companies that are not French, but have designed French compliant AV products aimed specifically at the expatriate market in France. These companies are typically situated in well-regulated EU financial centres, such as Dublin and Luxembourg. Before choosing such a company, however, it is important to establish that the company has a French fiscal representative, to ensure that you receive the same tax and inheritance advantages as a French equivalent product.
Some of the advantages of an international AV policy compared to French policies are:
How does an Assurance Vie work?
Your single lump sum investment or regular premiums are paid to an insurance company, which then places the money with the investment manager(s) of your choice. These are usually unit- linked types of investments, for example in equity or bond funds, but can also be in deposits or special products on offer from various financial institutions. You can invest in any number of different funds or products and these are all collated together by the insurance company to form a collective bond, which is your AV policy.
If you have chosen your investments wisely (with the help of your financial adviser), over the long-term the value of units you hold in the funds is likely to increase and so too is the value of your AV policy. However, you must be fully aware of and comfortable with the amount of risk that you are taking, since with any type of unit linked investment your fund value can go down as well as up, as a reflection of what is happening in investment markets. Over the long-term, however, the effect of short-term market volatility will usually be reduced.
Can my capital be guaranteed through an Assurance Vie?
A common feature of the French AV is the possibility of investing in Fonds en Euros. This is a special type of fund designed to form a very cautious base to your total investment, since your capital, as well as any interest and year-end bonus added to it, is guaranteed. The fund invests mostly in government and corporate bonds, although there can also be a little exposure to equities and properties with the aim of enhancing returns. During the year, your capital will earn interest and by law the insurance company must allocate most of your share of the return of the fund to your account, in the form of a year-end bonus. The balance of the return of the fund is kept in the insurance company’s reserves, to smooth out future investment returns, for example in times of poor market investment performance.
Due to the nature of the guarantees with Fonds en Euros, the rate of return is typically low, but is usually better than the interest that you might earn from a bank deposit with immediate access. However, this type of fund is regarded by the tax authorities as being so secure that social charges are levied annually on the gain (rather than only at the time that you take a withdrawal as would be the case with other investments within the AV). This effectively reduces the rate of return over the long term. Through some international AV policies there is the possibility to invest in structured bank deposit offerings, where the investment return is linked to the stock market, but with the security of a capital guarantee.
How do I choose what to invest in inside my Assurance Vie?
You may have strong views on this yourself, or you may have no ideas at all, but in all cases it helps if you have a good financial adviser at hand. His or her job is to help you understand the whole concept of investment and to help you establish your attitude to investment risk. Sadly, there is no realistic chance of a meaningful return on your savings without accepting some degree of risk. We have also seen in recent years that even leaving your savings in a bank can be risky, whether this is because you do not earn a real rate of return or because the bank fails due to poor management.
Your adviser will show you different types of investment options, explain how they work, what their track records are and how much risk is involved. You make the final decision, but his or her help can be invaluable. When the investments have been made, there should be follow-up meetings to review the performance of your investments. Your adviser may well recommend some changes depending upon the evolution of your own circumstances, or perhaps because of fund performance, or may have interesting new funds to introduce to you.
It is also possible to use the services of a Discretionary Fund Manager, with whom you agree an investment mandate (based on your specific investment objectives and risk profile), who then manages your money on a discretionary basis to achieve your financial goals.
How is Assurance Vie taxed?
Only the gain element of any amount that you withdraw is liable to income tax and the rate of tax is determined by the date on which premiums are paid.
Premiums paid before 27th September 2017:
For premiums paid before 27th September 2017, the taxpayer has the option to be taxed at the progressive rates of the barème scale or the Prélèvement Forfaitaire Libératoire (PFL) rates, as follows:
Premiums paid from 27th September 2017:
The Prélèvement Forfaitaire Unique (PFU) – also known as the Flat Tax – was introduced in the Project de Loi de Finances 2018, published on 27th September 2017. From this date the PFU applies to the total amount of interest, dividends and capital gains on the sales of shares received by the taxpayer. It also applies to certain gains on withdrawals from assurance vie contracts.
The Flat Tax rate is 30%, made up as follows:
For premiums to assurance vie contracts paid from 27th September 2017, the tax rate will vary according to the age of the contract, and for contracts older than eight years according to the ‘threshold’ amount of capital remaining in the contract as at 31st December of the year prior to the withdrawal being taken.
The threshold amount is €150,000 per individual person (across all assurance vie policies), which is determined by reference to the amount of the premiums invested, reduced by any capital already withdrawn, and not the value of the contract.
The threshold is not cumulative between persons and therefore couples who are taxed as a household cannot share in each other’s thresholds. Thus, one spouse may reach the threshold level whilst the other does not, for example where one has say €200,000 capital invested and the other only has €80,000 invested.
The PFU applies to assurance vie contracts of less than eight years regardless of the amount of the outstanding capital. Thus, the PFU rate of 30% replaces the pre-27th September 2017 rates detailed above.
Therefore, according to the age of the contract, the following tax rates apply:
* A lower rate of social charges at 7.5% applies if you are resident in France and hold the EU S1 certificate, whereby you are covered by the health system of another EU or EEA country.
Insurers are obliged to deduct the tax of 12.8% or 7.5% (depending on the duration of the contract) plus the social charges. Subsequently, for contracts older than eight years where the taxpayer has exceeded the threshold, any additional tax due is charged through the taxpayer’s annual declaration.
Tax-free allowance on all policies after the eight year holding period:
In addition to this, and in all cases regardless of the ‘premium paid’ date, after holding a policy for eight years a single taxpayer receives an income tax allowance of €4,600 per annum against the gain element of any withdrawals during the tax year. For a couple who are subject to joint taxation, this is increased to €9,200. Hence, providing that the gain element of total withdrawals made during the year does not exceed the allowance, then there is no income tax to pay. This might not sound a lot, but it is a very useful allowance, as can be seen in the following simple example.
Peter and Pam have an AV policy, which they start in January 2018 with an investment of €100,000. They do not make any withdrawals on this investment for the next eight years, and it is then worth €160,000 (hypothetical). A new car is then needed, and they need some cash to help pay for it, so they withdraw €20,000 from their AV. In this case €60,000 of their AV worth €160,000 is profit, and that is 37.5% of the total, so it is logical that the gain element of their withdrawal is €7,500 and €12,500 is their original capital.
The insurance company (assurance vie provider) will deduct income tax and social charges on the gain element when they pay out the withdrawal. Since the policy is over eight years old however, and they are subject to joint taxation, Peter and Pam have a tax-free allowance of €9,200. The gain will then be declared on their next tax return and they will receive a rebate of the income tax charged.
Does an Assurance Vie have other advantages?
Without doubt, the AV is effective for inheritance planning. There are age restrictions, but via an AV policy you can leave up to €152,500 to any number of beneficiaries, each of whom will pay no succession tax. In addition, AV policies are exempt from the strict French succession rules. You can leave your money to whomever you wish. Should you wish to leave more than this amount to any one beneficiary, they will pay tax at a rate of 20% on the next €700,000, and then at 31.25% above that.
Is an Assurance Vie right for me?
An Assurance Vie is a valuable asset, helping you to shelter your capital and income from unnecessary taxation. It can provide protection for you during your lifetime and protection for your loved ones when you are gone. However, everyone’s circumstances are different and it is essential that you take professional financial advice before investing into this type of product.
By Michael Doyle
This article is published on: 7th March 2023
It’s that time of year again where we all must start thinking about submitting our French tax returns.
Here are my 5 top tips for completing your tax return.
1. Gather all necessary documents: Before you start preparing your tax return, make sure you have all the necessary documents, such as your income statements, receipts for deductible expenses, and proof of any tax credits you may be eligible for, the figures taken from your bank account(s) and the relevant exchange rate(s).
2. Choose the right form: France has different tax forms for different types of taxpayers, so make sure you choose the right one. In general most people will need to declare their income on the main form (2042) and its related forms (2042C and 2042 pro), the 2047 for all foreign income and the 3916 for foreign bank accounts and investments.
3. Fill out the form accurately: Take your time to fill out the form accurately and completely. Make sure you provide all the required information, including your income, expenses, and any tax credits or deductions you may be eligible for. Remember to declare all bank and investment accounts as any omissions can lead to high penalties.
4. Submit the form on time: The deadline for submitting your tax return in France typically falls in May each year. Make sure you submit your form before the deadline to avoid any penalties.
5. Consider getting professional help: If you are unsure about how to fill out your tax return, consider getting help from a tax professional. This can help ensure that your return is accurate and that you are not missing out on any tax benefits.
This is also a great time to review your own financial planning needs.
Due to recent uncertainty in the markets many people are keeping their money in the banks.
Purely for illustrative purposes (as inflationary pressures are currently decreasing), if inflation did persist at say 7% for 10 years your spending power would halve over this period. Inflation across Europe has been higher than this throughout 2022.
Now is a good time to speak with your financial advisor.
By Katriona Murray-Platon
This article is published on: 9th January 2023
Happy New Year! I wish you all a very happy, healthy and prosperous year in 2023! I hope you all had a nice Christmas. We made it to Disneyland in spite of the train strikes in France and then onto the UK for our first British Christmas since 2018! It was good festive fun!
As from 15th January 2023, the tax office will pay you a 60% advance on some tax credits and tax reductions. These include the tax credits/reductions for charitable donations, home help costs and childcare costs. This will be 60% of the amount declared in 2022.
In my last Ezine, I mentioned the fuel allowance. Now, since 22 December 2022, there is an allowance of between 50 and 200 euros for those using logs or pellets to heat their homes. This is for people with less than 2260 euros income per month for a single person or 4750 euros for a couple with 2 children. You will need to request this payment by going to this website https://chequeenergie.gouv.fr/beneficiaire/eligibilite.
Since 1st January, receipts and bank card receipts will only be printed if you specifically request them. Also, from 1st January, companies (Entreprises individuels and SCIs) can do their own formalities online on formalites.entreprises.gouv.fr
No need to throw out your equipment when it breaks down. From 15 December 2022, it is even cheaper to repair your household appliances. There is a now a government allowance of between 10 and 45 euros off the price of repair depending on the type of appliance which works out to be around 20% of the repair costs. This only applies to appliances that are no longer covered by their warranty. For more details and to find an approved repair company go to: https://www.ecosystem.eco
Finally, in Spectrum news, from 16th to 20th January I shall be joining my colleagues for our annual conferences at the Gleneagles hotel in Scotland. As you know my name is Scottish and my father and his family are from Scotland, so I am very much looking forwards to going there and celebrating Spectrum’s 20th anniversary!
After five full years in the business I am beginning to get a sense of how variable each year can be. We have had three very strange years from covid and lockdown, to coming out of lockdown and getting vaccinations and then last year the war in Ukraine and inflation. Some analysts suggest that inflation may subside in 2023 but stop short of actually predicting this. Nobody has a crystal ball but I know what I do have that’s important which is my family, my friends and my clients. I’ve got you and you’ve got me, so whatever 2023 holds, I know that we can see it through together!
All the best for 2023.
By Katriona Murray-Platon
This article is published on: 6th December 2022
So here it is, Merry Christmas! I hope that you are having fun or planning to do so. There is much to organise before the end of the year, so before you get too wrapped up (excuse the pun) in Christmas preparations, I wanted to fill you in on some bits of news/financial points for the end of the year.
Given the increase in energy bills, the French government shall grant two one-off fuel allowances to help people pay their energy bills. Around 12 million homes will receive a one-off energy cheque. If you are eligible for the fuel allowance you should receive this €200 cheque automatically,. If your taxable income (revenu fiscal de référence par unité de consommation (RFR/UC)) is greater or equal to €10 800 € and less than €17 400, you will receive a cheque for €100. This cheque will be sent automatically from the end of December, you do not have to do anything to get it.
For the homes using “fioul domestique” : If you have already received the energy cheque for 2022 and you have used it to pay for your heating from a “fioul domestique” supplier you will automatically receive another cheque for €200 from November 2022
If you haven’t received this yet or you want to check whether you are available there is a website here https://chequefioul.asp-public.fr/ and through this you could receive a cheque for between €100 and €200 depending on your situation. If you haven’t received any cheques and you can’t make a request on this website you can contact them via this website: https://chequeenergie.gouv.fr
For those of you thinking of replacing your heating system with something more energy efficient, since the 29th October, the lower income households could receive €5000 of state aids (instead of €4000) and other households could get up to €4000 instead of €2500.
The annual social security ceiling (plafond annual de la Securité social) which is used to calculate various retirement contributions and the maximum allowed amount of benefits and French pensions has increased to €43,992. A monthly maximum of €3,666 will apply from 2023. This is the first time that this has increased in three years!
Please note that you have until 14th December to correct your 2021 tax return on your personal account on the impots.gouv.fr website. After this date you will have to correct it using a paper return.
The 15th December is the last day to pay the taxe d’habitation for second home owners in France. You have 5 extra days if you pay online or by direct debit.
If you are self-employed in France and earn over €5000 per annum, you will have to pay CFE. This is a local tax and is based on the rental value of the space you use for your business. If you don’t rent premises for your business, you have to pay the minimum CFE and this will be calculated on your annual turnover. It all depends on the rate applied by your local authority. The CFE must be paid by 15th December. You can also spread the payments out over the year.
Finally, if you are still actively working in France and are likely to do so for the next 10 or 15 years or more, and you pay tax at least in the 30% tax bracket, it may be worth opening a PER. If you already have a PER, and you have some money to invest in it, make sure you do this by the end of the tax year, ie 31st December 2022. If you are in the 30% tax bracket, 30% of the amount you invest in the PER can be deducted from your tax (41% if you are in this tax bracket) up to a maximum amount of 10% of your net taxable income from the previous year and up to a maximum amount of €32,419 in 2022.
2022 has been a brilliant year for me, my best so far, and I have been so happy to welcome lots of new clients.
I want to thank all of you for your time and attention to these newsletters and your kind comments. I especially want to thank all my clients for entrusting me to set up their investments. As always if you have any questions on the above or any other matters please do get in touch.
I shall be away from 18th to 28th December, first to Disneyland Paris and then to the UK for a good ol’ British Christmas with my family. I will be checking emails and can do phone calls if necessary.
I wish you all a very Happy Holiday season and look forwards to speaking to you next year!
Regards
Katey Murray
Partner
The Spectrum IFA Group
Mob: 06 81 61 78 44
Tel: 09 53 28 88 22
By Katriona Murray-Platon
This article is published on: 4th November 2022
I am the proud mother of two wonderful boys. I love my children very much, but in addition to the joy they bring to my life, they also bring tax advantages. Admittedly the tax benefit is probably less than the overall expense of having children, but one must count one’s blessings!
Let’s take a couple earning €60,000 per annum.
The current tax brackets for 2022 are as follows:
| Income | Tax rate |
|---|---|
| Up to €10,225 | 0% |
| From €10,226 to €26,070 | 11% |
| From €26,071 to €74,545 | 30% |
| From €74,56 to €160,336 | 41% |
| Over €160,336 | 45% |
*These tranches are likely to increase by 5.4% in 2023.
If they have one child? their tax is reduced by half a tax part. Whereas alone they were in the 30% tax bracket, with one child their income is divided by 2.5 to €24,000 per person, which puts them into the 11% tax bracket. Their tax bill would be €3,788 instead of €5,844. The child has saved them €2,056 of tax. If they had a second child, and on the same income, their tax would be €3,226. The second child has therefore saved them €562 euros.
In addition to lowering your taxes, if your child is under six and goes to a child minder or nursery, 50% of these costs, up to a maximum of €2,300 per child may be deducted, so a maximum tax credit of €1,150 per child. This is a tax credit, so in our example above, the couple would pay only €926 in taxes.
After six years old and until they go to high school, as delightful as they are during this time, there are no tax advantages. From high school onwards there is a small tax reduction of €62 per child in high school, €153 per child in sixth form college and €183 per child in higher eduction (provided it is non-remunerated studies).
However when they are in their 20s and pursuing further education, this is the time to look at whether you are better to keep them in your tax household or take them out of your tax household and deduct the money you give them to pay for their studies, accommodation and food etc. I remember, when I was a tax lawyer, suggesting to a lady who had four sons, that she should remove her youngest son from her household – she looked a bit shocked! I meant of course that she should take her son out of her tax household, not kick him out of her actual household. It is quite common for children in France to remain at home during their university studies. The money given to an older child is deducted from the household income before it is subject to tax.
For an adult child to be considered part of your tax household, they must be under 21 on 1st January of the tax year (so 1st January 2022 for the tax return done in 2023), or be under 25 years old on 1st January 2022 and in higher/further eduction as at 1st January 2022 or 31st December 2022. There are also various conditions for children living with an adult relative.
So if we look at the couple above and both their children are at university. In 2021 they could have deducted up to €6,042 per child from their income which would have reduced their tax to €3,021 for the two of them without the children instead of €3,226 had the children been included on their tax return. For 2022, according to the Draft Finances Bill, this deduction is increased to €6,368 per child. For the full reduction to apply, you must be able to prove that the child needs this money, that they are unable to work or, if they have a student job, that they earn less than the minimum wage. You can deduct up to this amount but you have to be able to prove the expenses if so requested. If the child still lives with you, you can deduct their accommodation and food bills, up to €3,592, without need to justify these expenses.
Once your child is removed from your tax household, this will mean that they have to do their own tax return and declare the financial help that you are giving them. However, if they are earning less than the first tax bracket (€10,225 in 2021, €10,777 in 2022) then they won’t have any tax to pay.
For any questions on Children and taxes in France or on your general financial planning in France, please do get in touch via the form below:
By Katriona Murray-Platon
This article is published on: 3rd June 2022
If you have paid too much tax you should get the reimbursement around these periods. If you have tax to pay it should be taken from your bank account automatically. If not you have until 20th September to pay online. The money won’t be taken out of your account until 26th September. If you owe more than €300 tax, this amount will be taken in four payments between 26th September and 27th December 2022. If the amount due is less than or equal to €300 then this amount will be taken out in one payment on 26th September. Please remember that during September the 9th instalment of your monthly payment of income tax will be taken on 15th September, so you may have two tax payments in September (and in the following months if you owe more than €300).
A situation was brought to my attention about Capital Gains Tax on the main residence when you leave France. There was a court case in 2017 which reached the French Constitutional Court regarding the exemption from capital gains tax for the main residence. Whereas a French resident may vacate his/her main residence and has 12 months to sell it for it still to benefit from the main residence exemption, according to this decision if you are no longer French tax resident at the time of sale you lose this exemption on the capital gains.
Furthermore under Article 150 U, paragraph 2, line 2, of the French Tax Code the capital gains from the sale of a property are exempt from tax “for the sale of a property situated in France where the seller is an individual, not French resident, a national of a Member State of the European Union or another State which is part of the EEA having agreed with France an administrative assistance agreement to fight against fraud and tax evasion and provided that the person was tax resident in France continuously for at least two years at any period before the sale. The exemption mentioned in the first line of this second line applies only to one property per tax payer and up to €150,000 of net taxable capital gain, to sales carried out:
a) no later than 31st December of the fifth year following the year in which the seller ceased to be tax resident in France,
b) with no time restrictions, when the property is freely available to the seller at least since 1st January of the year before the sale”.
It is this section of the French Tax Code which could, according to some Notaires, no longer apply to British citizens selling their French properties and returning to the UK since Britain is no longer part of the EU. I have spoken to two Notaires about this and neither seemed to be bothered about it. But Notaires can take different views on things. So if you (or someone you know) are planning to sell what is currently your main residence in France and move back to the UK make sure you clarify exactly what you have to do with your local Notaire and do not move back to the UK and establish UK tax residency before the sale is complete.
After a busy month of May with many people contacting me with tax questions, I am looking forward to a more normal month of June and getting out in the sunny weather to see clients. So if you would like to arrange an appointment or need to speak to me about any matters please do get in touch!
By Andrea Glover
This article is published on: 13th September 2021
I have had several queries over the last few months about the tax treatment of UK pensions in France, whether they are being received as a regular income or where clients have or are about to take a one-off lump sum to pay for a large purchase. Many of the queries were relating to the completion of French tax returns, but we are also seeing a large number of queries where advice is being sought on French tax treatment of pensions prior to a move to France.
So, in this article, I am going to go back to the basics and go through the different types of UK pension scheme and their tax treatment in France for French tax residents.
UK State Pension
As a French resident, the UK State Pension is taxable in France (not the UK) and where an S1 is held, no French social charges are payable. It is important to note that the UK State Pension can be paid directly into a French bank account, in euros, although the amount will obviously fluctuate due to exchange rates.
Government pensions
UK government pensions are dealt with under the UK/France double tax treaty and apply to those who have previously worked in the Armed Forces, Civil Service, Fire Service, Local Authority, NHS (with exceptions), Police and Teaching amongst others. A full list is available at www.gov.uk/hmrc-internal-manuals/international-manual/intm343040 to help you identify if your pension is classified as ‘government’.
Under the double tax treaty, UK government pensions are taxed at source in the UK. The pension income still has to be declared in your French tax return, but a 100% tax credit is given so that the same tax is not paid twice. It is important to note, that such pension payments are taken into account to calculate your overall income and could have the effect of increasing the rate at which other sources of income are taxed.
Qualifying government pensions are exempt from social charges.
Private pensions (occupational, stakeholder, SIPP)
Pension payments received from UK private pensions are taxable in France (not the UK) if you are French resident and again, where an S1 is held, the payments are exempt from social charges.
Annuities
Annuities are more complex and advice needs to be sought to establish the type of annuity held, as annuities can be interpreted as investment income in France rather than pension income.
Allowances
Amongst other allowances relating to pension income, there is a general 10% tax abatement on pension income (with the exception of qualifying UK government pensions) with a minimum of €394 and a ceiling of €3,858 (applicable to 2020 tax returns and subject to change). The allowance is per taxpayer, although the ceiling stated is per fiscal household.
The allowance only relates to tax and not social charges, where applicable.
Lump Sums
Lump sum pension payments are an area for discussion in another article. Other than qualifying UK government pension lump sums, such payments (including UK tax free lump sums) are taxable in France.
I would always strongly recommend that you speak to a France based qualified adviser, familiar with UK pensions, before any firm decision is made to take a lump sum payment.
By Amanda Johnson
This article is published on: 23rd July 2021
How to manage wealth effectively, whilst minimizing administration, requires an experienced adviser with access to solutions purposefully built for the French marketplace, with due regard for t he local taxation and legal systems.
Because knowledge allows us to make better decisions, we invite you to watch the recent webinar with Quilter International.
The webinar considers financial planning options designed to help you keep more of your wealth for longer, ever mindful of the crossover with other countries, such as the UK.
As one of the leading providers of wealth management solutions, Quilter International works primarily with expatriates in around 40 countries, including France. Their speaker, David Denton, is a Fellow of the Personal Finance Society and Trust and Estate Practitioner, and has spent almost three decades in wealth management, training professional and lay audiences world-wide, on the subject of wealth preservation.
