Tuesday, July 05, 2011
Living in (or moving to) France - some tax tips to consider
French taxation policies seem to dominate headlines at home and abroad lately. Thankfully President Sarkozy has scrapped his daft idea of taxing second homes but nobody really knows what he will come up with next.
Meanwhile there are certain steps you can take to minimise liability.
The team at FrenchEntrée have put together a whole host of useful articles and briefing papers in their tax zone and I've taken the liberty of recreating this article by the excellent Duncan Camppbell of Siddalls.
Tax tips for UK residents moving to France:
1. Before you leave, make sure you complete the Inland Revenue Form P85 to inform them of the date you leave the UK. They will finalise your tax affairs.
2. Obtain a forecast from the Department of Work and Pensions of your entitlement to a state pension and if you need to make additional class 3 contributions to obtain your full entitlement. Note, however, that anyone retiring after 2010 may get a surprise. The qualification for a maximum pension reduces from 40 years full NI contributions to 30 years. Do not overpay!
3. Consider taking any tax free cash commutation from your pensions whilst a UK resident. Since the start of 2011 lump sums taken from a UK pension scheme are taxable in France.
4. The tax benefits of holding stocks & shares ISAs and cash ISAs will no longer be available to you once you are French resident. You should therefore consider realising any gains, free of UK income or capital gains tax, before you make your move. There are re-investment options available through other deposit and investment products which are more tax-efficient for French residents.
5. There is no substitute for taking advice from qualified advisers who are regulated in the UK by the Financial Services Authority and are familiar with taxation and investments in France and the EU. This is to ensure you are taking advantage of all windows of opportunity, i.e. maximising your French IHT exemption limits whilst still a UK resident.
Tax Tips for UK tax residents in France:
1. On becoming a French tax resident it is your responsibility to make yourself known to the tax authorities and to declare fully your income, capital gains and wealth. Once you have made your first return they should automatically send you a form in future years.
2. Ensure you each top up to the maximum your tax free accounts which are Livret A (€15,300) and a Livret de Développement Durable account (€6,000).
3. Take steps to keep your taxable income to the minimum by placing surplus funds in tax efficient investments. Investment income is liable to income tax, social charges and if you do not qualify may also be liable to contributions to the French healthcare system.
4. French inheritance tax may not be as bad as you fear. The allowances for assets passing to children may be lower than the UK but so are the rates. There are ways of reducing and possibly removing any liability to French gifts tax and inheritance tax on assets passing to children.
5. "Do as the French do". They take active and sensible steps to avoid unnecessary taxation. Seek advice from persons authorized in France who have access to a variety of solutions and not just one product.
Like anything else in life you should take professional advice - it will save you time and money and give you peace of mind.