Viewing posts categorised under: Tax in France

Tax in France – what needs to be declared

By Katriona Murray-Platon
This article is published on: 6th May 2021

06.05.21

No-one needs reminding that 2020 was a year like no other. Our lives were changed in many ways and this had an effect on our finances. Luckily there were many government schemes and initiatives to help people overcome the financial difficulties suffered in lockdown and because of the health restrictions. However now that 2021 tax season is upon us, what now needs to be declared?

Salaried workers bonus is tax exempt
Last year some salaried workers may have received a consumer bonus which is exempt from tax up to €1000 (or €2000 if there is an interest agreement/“accord d’intéressement”) Public workers and health workers also received a bonus which is exempt up to €1500.

Overtime hours are usually exempt up to €5000 per year, however the exemption threshold has been increased to €7500 for those hours carried out between the beginning of lockdown (16th March 2020) and the last day of the emergency health state set at 10th July 2020. This applies to salaried workers in the public and private sector as well as those under special regimes. All exempt overtime must still be declared on the tax form and will be included in the tax income reference rate for the tax household.

The Ministry for Economy and Public Accounts has announced that the payments paid by companies to their employees to cover the costs of working from home are exempt from tax up to €2.50 per day worked at home and up to €50 per month for 20 days and €550 per year.

Salaried workers who choose to deduct their actual costs rather than applying the flat 10% abatement on their salaries, can still choose this options without supplying supporting documents however these deductions may not be so beneficial depending on your level of salary. As always it is best looking at both options and seeing which works best for you.

Charitable gifts in 2020
Although things were hard for many people last year, it was also a year, more than ever to help those less fortunate. Gifts given in 2020 to humanitarian organisations and victims of domestic violence result

in a tax credit of 75% of the amounts donated up to a maximum threshold of donations of €1000. Over this threshold and for donations given to other organisations (including political parties), the rules haven’t changed, the tax reduction is 66% for such donations and he maximum threshold is 20% of the taxable income. The excess can be carried over over the next 5 years and results in a tax reduction under the same conditions.

Independent workers
Companies and individual tradespeople benefitted a lot from the government help last year. Fortunately the financial help granted by the solidarity fund to companies most affected by the health crisis, the exceptional financial help to independents (CPSTI RCI COVID 19) and those paid by the additional pension schemes of independent professionals and lawyers (CNAVPL and CNBF) are all exempt from income tax. The other help from public or private entities are taxable if there is no specific legal provision that exempting them otherwise.

Auto-entrepreneurs and micro-entrepreneurs who were exempt from paying part of their social charges must include in their tax declaration the turnover figure that was not declared to URSSAF because of this exemption.

Home help tax credit – changes to the conditions
The home help services normally give rise to a tax credit of 50% of the amount paid out. These expenses are deductible up to €12,000 (plus €1500 per dependent and person over 65 years, up to a maximum of €15,000). However in 2020, during lockdown some of these services had to be temporarily suspended or even cancelled, or in certain circumstances could be carried out online.

If you employed someone carry out a service in your home, you may have benefitted from the partial compensation for the hours that your employee was unable to carry out during lockdown. These compensated hours cannot benefit from the normal tax credit and if you nonetheless paid your employee their salary even though they couldn’t actually work, this cannot be used for the tax credit (it is classified as a solidarity donation).

Exceptionally, some services, which in principle took place in the home, but were in fact carried out remotely because of the health crisis, still give rise to the tax credit under the same conditions as other home help services. These include online additional schooling support lessons and individual lessons (gym, music etc) given to adults or children. The Ministry of Economy and Finance has specified that these services “must have involved a minimum amount of effective interaction, implying a physical presence of the person supplying the service at one end of the screen/telephone line and the be specifically given to the person paying for the service at home”. This therefore does not include online group lessons or watching pre-recorded videos online. This derogation applies throughout the time that people were not allowed to go out either because of lockdown or curfew.

Professional landlords who waived rent
If you are a professional landlord and you waived the rent of your tenants for a commercial or professional premises rented to a company that was difficulty because of the Covid crisis, you can still deduct your expenses (ownership expenses and mortgage interest). You also can carry forward your rental loss, up to €10,700, on your overall income. The additional loss – and the part of the deficit arising from the mortgage interest – will be carried forward and deducted from your income over the following 10 years.

There is also a specific tax credit if you definitively waived rent for November 2020 only (not any of the other months in 2020). The tenant company must have employed at least 5000 employees and have been closed to the public (even if they were able to do click and collect) or to have carried out its business in one of the sectors of business that were eligible for the solidarity fund as listed in Decree no 202-371 of 30.03.2020 (hotels, travel industry for example).

Furthermore the tenant company must not have been in financial difficulty on 31st December 2019 or have been under court ordered administration proceedings as at 1st March 2020. The tax credit is equal to half of the unpaid rent if the company employed less than 250 employees. If the number of employees was between 250 and 5000, the 50% is calculated on the two thirds of the rent. If the tenant company is managed by an ascendent, descendant or member of your tax household, you must justify the cash flow problems in order to deduct your expenses and get the tax credit.

Voluntary retirement contributions
You can deduct from your total income the sums paid into a retirement scheme such as PER, PERP or Préfon up to the normal deduction limits. If you have opened a PER for your child (whether a minor or of age but still within your tax household) you can deduct the payments even if they payments were paid by your own parents (the child’s grandparents) Children have their own deduction amounts even though it is not necessarily stated on the tax return.

Download your French tax guide here

Are you a French tax resident who owns a house in the UK?

By Spectrum IFA
This article is published on: 4th May 2021

04.05.21

UK Property Matters

I thought I would write this month about the topic I am asked most frequently about at the moment by clients and prospective clients, which is the subject of owning property in the UK as a French tax resident.

There are many reasons for deciding to keep properties in the UK when moving to France. Whether it be a ‘bolt hole’ to go back to for those that frequently return to the UK for family or work, or as an investment to generate rental income to supplement retirement.

There are several potential French and UK tax consequences to consider, when owning property in the UK, which I will cover in general terms by each specific tax area.

Wealth Tax

Wealth tax in France is called Impôt sur la Fortune Immobilière (IFI). The assets that are taxable under IFI are all worldwide real estate and investments in real estate which includes, amongst others, the main home as well as second homes. Business property assets are exempted subject to certain conditions.

The tax is triggered by eligible net property wealth of more than €1.3 million. For UK expatriates living in France, foreign assets are exempt from wealth tax for the first 5 years.

Capital Gains Tax (CGT)

As a French tax resident selling property in the UK, you are liable to CGT both in the UK and in France.

Since 2015, the UK has applied CGT on the sale of property of former residents noting that private residence relief, if applicable, is available for the final 9 months of ownership. It is only the gain from April 2015 that is taxable and the normal tax free allowance (currently £12,570) also applies.

French CGT and social charges are applicable in France on the sale of a UK property and are based on duration of ownership. Some exemptions do apply, for example when the property was the principal residence in the previous 12 months, although certain conditions apply.

Under the UK/France double tax treaty, UK expatriates can receive a credit in France for any UK CGT paid on the sale of the UK property, but they cannot offset any UK CGT paid against a social charge payment.

UK Property Rental Income

Rental income from a UK property, when resident in France, still requires the completion of a UK tax return.

As a result of the UK/France double tax treaty, income tax and social charges are not payable in France. However, it is important to note that this income is still declarable in France and is taken into account when establishing the tax bands applicable for all other declarable income.

Inheritance Tax on a Property Held in the UK

The subject of French inheritance tax is a complex subject that could justify an article in its own right, but in general terms, under the UK/French Double Tax Treaty on inheritance tax, the UK property would fall under UK inheritance rules and applicable taxes.

In summary, owning property in the UK has potential tax consequences in both the UK and France and as with all such matters, I would recommend that you seek the advice of a suitable expert in all circumstances.

Download the 2021 French Tax Guide

French Tax Returns 2021

By Katriona Murray-Platon
This article is published on: 3rd May 2021

03.05.21

The right to make mistakes

There is an expression in France which goes “In May, do what pleases you” (en mai fait ce qui te plait). This refers to the fact that any frosty weather will have gone by the end of April and you can go out and enjoy the warm weather. However, there is something very important that needs to be done before we can go out and enjoy ourselves and that’s the tax return. Although the tax return is available online in early April, personally I’m not psychologically ready to deal with my tax return until May and then not even that much! As a former tax adviser I used to do around 200-300 returns for clients between March and June, but I have to admit that doing my own tax return is quite a task and requires preparation. It’s a bit like deciding to do a full Sunday roast; you need to make sure you have all the ingredients because you don’t want to get the meat in the oven and discover that you’ve not bought the gravy!

If you think French tax is daunting, you’re not alone. The French themselves find their tax returns difficult and the French authorities know that it isn’t easy. Moves have been made in recent years to simplify the system with information being automatically declared by employers and banks so that it appears in the tax return, but there is still information that needs to be checked and other information (like expenses or tax credits) that must be included to calculate the tax correctly.

The preferred method of declaration is online, or even through an app on your smartphone or tablet. However, whilst the French authorities would prefer an online declaration, if this is your first year declaring or you really can’t do it online, you can submit a paper return.

The deadline for a paper French Tax Returns 2021 declaration is 20th May this year whereas the online deadlines are:

26th May for departments 1 to 19 and for non-residents
1st June for department 20 to 54
8th June for departments 55 to 976

These dates relate to the place where you were resident on 1st January 2021.

Even though the French tax authorities are trying to make the system simpler, even introducing an “automatic declaration” this year for those 12 million French tax payers with income and expenses already known to the authorities, the Finance Minister knows that people still make mistakes. The most common of which is failing to declare a child who is in college, lycee or university. Another is that if you opted for the marginal rate on your interest and dividends before, the option is carried over and the box 2OP already ticked on the declaration but an alert message will appear if this regime is not the most favourable. The ten most common errors can be found on the website oups.gouv.fr. Costs for childcare for children under 6 years old, confusion over who includes the child when the parents are separated or divorced and tax deductions for charitable gifts are among the most frequent mistakes.

Since a law introduced in 2018 to help improve the relationship between the administration and the general public, you now have official permission to make mistakes in your declaration. You are presumed to be declaring in good faith and you have the right to make a mistake when making your declarations without being penalised from the outset. Any individual or company can amend, either voluntarily or if requested by the authorities, their mistake if it has been committed in good faith and for the first time. This doesn’t cover fraudsters or repeat offenders and whilst it means you can avoid a fine you will still have to pay any extra taxes that are due. Tax advisers and accountants are mad busy at the moment, so if you haven’t already found one to do your tax return they will be very reluctant to take you on now. However, some tax offices may allow you to make an appointment and bring your papers and information to do your tax return with them. You have an official right to make a mistake and as long as you submit something before the deadline, you can then correct it later.

The first time I did a roast dinner as a student I had to call my grandma (a former professional cook) and I am happy to say no one got food poisoning! Like many things in life, these things can seem daunting to begin with, but if you do your best and follow the instructions, you will be proud of yourself once it is done and then you can go out and enjoy the sunshine with a large glass of wine!

Big brother is watching… or might be

By Katriona Murray-Platon
This article is published on: 2nd April 2021

02.04.21

After the fun and festivities of March (or those that could be had in current circumstances) it’s time to get down to serious tax work in April. The tax forms and dates of submission have not, at the time of writing, been released so that will have to wait until next month’s Ezine but usually the forms are available around the second week of April. If this is your first year of declaring in France you will have to go to the tax office to get the paper forms to complete. After submitting your first paper return you should then be given details to allow you to log on to your online account and do future returns online. The paper returns you will need are usually the 2042, sometimes the 2042 pro if you have professional income, the 2047 for all foreign source income and the 3916 for bank accounts and assurance vies (section 7 of the form).

The 3916 has recently been amended to take into account the new information that needs to be declared. Make sure you tick box 8UU for bank accounts and 8TT on the 2042 form to flag the fact that you have foreign assurance vies.

Under Article 1649 AA of the French Tax Code, those tax payers who have foreign assurance vies must declare the policy number, the amount of the investment, the start date of the policy and the duration of the contract or investment, any top ups or payments or reimbursements of premiums made during the tax year and, if relevant, the amount of any withdrawals or the surrender value,

Article 344 C of the Tax Code has now added new requirements concerning the information for foreign assurance vie policies which are:

The identification of the policy holder: name, forename, address, date and place of birth,
the address of the head offices of the insurance company or similar institution and, if relevant, the subsidiary which grants the cover,
the person covered by the policy, its reference numbers, the nature of the risks covered,
the amount covered by the policy and the duration of this cover,
the dates of any amendments to the contract, total or partial withdrawals, which have taken place during the calendar year.

Our policy providers are aware of this new law and will send out the relevant information for you to add into your tax returns or attach as a document online.

Those who have regular at home services and pay via CESU usually receive a tax credit for these expenses, 60% of which is paid in January. From June 2021 the tax office will be trialling a new system of immediately paying the tax credit for home help for those employers in Paris and the Northern departments who use the CESU system, before progressively rolling out this system across the whole country in 2022.

According to a study from the US bureau of Labor Statistics in 2015 which looked at the number of jobs a person held between the ages of 18 and 50, the average person will have had 12 jobs. This is during a span of 32 years, so therefore the the number is likely to be higher for a person’s entire lifetime. This means that you are likely to have several pensions with several pension providers without knowing the value, investment strategy, performance or fees on these investments.

France has clearly realised this situation as well. Retirement plans for French companies are held by insurance companies, so when you leave the company you may not continue to receive information on what rights you have accrued. Now, thanks to new legislation, insurers must send the information on file to a centralised body. If you are or have been an employee in France you can go to the website info-retraite.fr to be informed of what rights you may have. The new law also requires employers to communicate a statement of the retirement products to those leaving the company. When I left my job in Paris I had a PEE (Plan d’Epargne Entreprise or company savings policy) which I had done nothing with. I was advised that as I was no longer an employee of the company this was just being eaten up by fees. I closed it down and reinvested the money into two assurance vies for my sons which are now growing nicely.

The Spectrum IFA group offer a free review of your pensions. We will help you obtain the relevant information from your pension providers and prepare a free report on your current pension plans and their benefits and whether they can or should be combined into one self investment pension plan or qualified overseas pension scheme. As I often say to clients, I agree with the many eggs in baskets principle but it is better having your baskets on a shelf where you can see them rather than eggs hidden around the farm!

If you have an SCI remember to put the 4th May in your diary (may the fourth be with you!) as this is the deadline for the income tax return for SCI companies that are not subject to corporation tax. This is also the deadline for accountants to file the income statements for those with industrial and commercial businesses (BIC), non commercial businesses (BNC) and agricultural businesses (BA). The deadline is extended to 19th May for online declarations. As yet the other tax filing deadlines are not known.

In the finance law for 2020 (article 154) a new law allowed the tax and customs authorities to use certain data published on the internet (Law no 2019-1479 of 28.12.19). The decree implementing this data mining provision was published in the Official Law Journal on 13 February 2021 (no 2021-148 of 11.02.21). This means that the tax authorities are allowed, experimentally and for only three years, to use information published by tax payers on social media (Facebook, Instrgam etc), sales sites (Ebay, Leboncoin etc) and other networking sites such as Airbnb and Blablacar. After researching, analysing and modelling fraudulent behaviour, the tax authorities can then use this data. They do not however have unlimited power, they are subject to the CNIL (National Commission for Freedom and Information Technology) and Parliament, to whom a report must be submitted in August 2022 and August 2023. The data mining can only be used to track non disclosed business activities and false declarations of off shore domiciles. Only “deliberately divulged” information can be collected and used, access to which does not require a password or subscribing to the website. Private posts or comments from third parties cannot be used. The data must be erased after 30 days if it isn’t going to result in an investigation. Data on sensitive subjects such as political views, religious beliefs and health information must be erased after 5 days on the same grounds. Whether this experiment will be extended or not remains to be seen but in the meantime it is another reason to be careful what you put out on publicly accessible social media.

If you have any questions or would like to speak to me about any of the points mentioned above please do let me know. Thank you to those who have got back in touch after reading my Ezine or have let me know that you are still enjoying reading these emails.