Introduction
You are French tax resident if:
- France is your main residence or home, or
- France is your séjour principal. This usually means spending more than 183 days in France per calendar year. However, an individual who spent only four months in France, with the other eight months spread among six countries, was deemed to have their séjour principal in France, or
- Your principal activity is in France, e.g. occupation is in France (whether salaried or not), or your main income arises in France, or
- France is the country of your most substantial assets (centre of economic interests).
- The French tax year is the same as the calendar year.
Income Tax and Social Charges (for 2008 tax returns).
This is based on 2007 worldwide income for French residents.
Portion Net income subject to tax (Euros) Rate of Tax
- Up to 5,687 Nil
- 5,688 to 11,344 5.5%
- 11,345 to 25,195 14%
- 25,195 to 67,546 30%
- Over 67,546 40%
The aggregate taxable income of the household is divided by the units of the family (parts), determined by the marital status of the taxpayer and the number of minor children, or certain other dependent persons in the family. The tax per part is then calculated on the resultant figure by reference to the tax scale, the total tax payable being the tax payable per part, multiplied by the number of parts.
A married couple’s income is divided into 2 parts, with an additional half part for the first and second children, and a whole part for the third and subsequent children e.g. a married couple with four children would be entitled to 5 parts. This helps avoid the higher rates.
In addition to income tax, France imposes social charges on all French residents as follows:
a CSG: Contribution Sociale Généralisée
This amounts to:
7.5% on 97% of earned income
6.6% on 95% of gross pension income, unemployment and social security benefits
8.2% on investments, annuities, rental income and Capital Gains (except for certain savings accounts at French Post Office and Savings Banks)
b CRDS: Contribution au Remboursement de la Dette Sociale
0.5% on all income subject to CSG
c Additional: Prélèvement Sociale of 2.3% on investment income
Note that CSG and CRDS are not payable on salaries or self-employed earnings from other EU countries if ‘social’ charges, such as UK National Insurance contributions, are payable under the foreign system. They are also not payable on foreign pensions if you are below retirement age and temporarily covered by Form E106, or over the retirement age and permanently covered by Form E121.
Capital Gains Tax
Property Sales
Gains arising on property (real estate) owned for 15 years or more is exempt. Otherwise, after 5 years of ownership, the net gain is reduced by 10% for each subsequent complete year of ownership.
There is also a general allowance of €1,000, but no allowance for inflation.
Residents pay capital gains tax at a flat rate of 16% plus 11% social charges.
If non-French resident, the rate is 16% if EU resident, 33.3% if non-EU resident, or 50% if deemed a trading transaction.
If it’s your home and you’re a French tax resident, it’s tax-free.
Shares
Gains made by residents on shares are taxed if the total sales proceeds exceed €25,000. The rate is 18% plus 11% social charges and no relief for inflation is given. There is no distinction between long- and short-term gains.
From 1st January 2006, gains on certain shares held for more than 8 years will be exempt from tax; however, the holding period only commences from 1st January 2006.
Non-residents are exempt except for certain holdings in French companies.
Gains on shares in property-holding companies are taxed in the same way as gains on property, however.
Other Moveable Assets
Gains on other movable assets are taxed only if total sale proceeds exceed €5,000 or if held for less than 12 years. Non-residents are exempt
Wealth Tax
The basis of valuation is 1st January (i.e. the start of the tax year) and on worldwide assets if a French resident. Your home may be valued at 70% of fair market value. Non-residents are also liable to wealth tax, but only on the value of their French assets.
If you are non-resident in France, having a mortgage over the property may reduce the value for wealth tax purposes.
Tax in France (Blevins Franks Tax Advisory Service)
2008 rates included
The Wealth Tax Rates for 2008 are:
Gross Worldwide Assets Percentage
- Under €770,000 0
- €770,001 to €1,240,000 0.55
- €1,240,001 to €2,450,000 0.75
- €2,450,001 to €3,850,000 1.00
- €3,850,001 to €7,360,000 1.30
- €7,360,001 to €16,020,000 1.65
- €16,020,001 upwards 1.80
Inheritance Tax
Inheritances between spouses and PACS partners are now exempt in France.
Gifts between spouses and PACS partners are taxable, after an allowance of €76,988.
The tax-free allowances for inheritances and gifts received by other recipients are:
- To children (each child) €151,950
- To parents (each parent) €151,950
- To brother/sister €15,195
- To niece/nephew €7,598
- Disabled person €151,950
The tax rates for assets passing between spouses and from parents to children are progressive from 5% to 40%.
Rates for so called “strangers” – including unmarried partners with no PACS agreement and step-parents/children – is 60% flat with a tax-free allowance of only €1,520.
Unmarried couples, whether same sex or opposite sex, can enter into a French Civil Partnership (PACS) if one of them is a French national or they are resident in France.
A UK Civil Partnership is not recognised in France, and therefore, advice specific to your situation should be sought, to aid succession of assets and minimise tax liabilities.
There are a number of ways to avoid this tax – seek advice.
Pensions
Unless it is a UK civil service or other government service pension (which always remains liable to UK tax), the pension income will be liable to French tax in full. However, there are circumstances where tax can be reduced, and advice should be taken on this.
Local Taxes
There are various local French taxes equivalent to the UK Council Tax. In addition, there is a wealth tax which starts on any assets in France in excess of a value of €770,000. The tax rates are shown above.
Ownership Structure
Sometimes it is possible to avoid the wealth tax by having an SCI (a special type of French property-holding company), and that SCI is funded by loans rather than equity. Blevins Franks can advise in this area.
Be very careful about putting your French property into an Offshore Company – the French have a penalty tax on such structures of 3% of the property value per annum.
What do I do next?
Blevins Franks operates a UK and International Tax Advisory Service specialising in French / UK taxes.
For more information, visit our website at www.blevinsfranks.com, where you will find details of all of the group's activities and regular updates for those living abroad.
Introduction
The Blevins Franks Tax Advisory Service (“TAS”) was originally established in 1983 when Blevins Franks International opened its overseas office in Spain, France and Portugal to offer specialised tax planning, relevant to both the UK and Overseas. The service is designed for foreign property owners and for those deciding to live abroad, both prior to and following their departure.
TAS has professionally qualified advisers dealing with over 20 foreign jurisdictions, including Spain, France, Portugal, Cyprus and Malta. TAS has unique knowledge of the local tax rules of the territories in which it operates, which ensures that its clients obtain full advantage of the often overlooked tax planning opportunities that exist in most overseas locations. Without this expert guidance the tax consequences of owning a property or living abroad can be punitive.
TAS is staffed by fully qualified members of the Chartered Institute of Taxation who have specialised in overseas taxation, as well as being UK tax specialists.
The Service is under the direct supervision of David Franks FCA MBA who is also Chief Executive of the Blevins Franks Group and an acknowledged tax expert.
Services
The advice given by TAS includes
• Tax Residence
• Income Tax Planning
• Treatment of Pensions and Annuities Overseas
• UK and Overseas Inheritance Tax Planning including Avoiding Foreign Succession Law
• Domicile
• Offshore Trusts
• Capital Gains Tax – UK and Overseas
• Property Ownership Structures
• Taxation of Second Homes
• Tax Efficient Investments
• Social Security, as applied in your country of interest
• Health Care Arrangements Overseas
• Corporate Structures
• Rental Income
• Double Tax Treaties
• Legal Tax Avoidance both in the UK and overseas
• The Effective and Appropriate Use of Tax Havens
This list is not exhaustive and a full advisory service is available on any tax issue of concern.
The specialist tax advisers at TAS are regular speakers on overseas taxation at a wide range of conferences and exhibitions throughout the UK.
The Blevins Franks Tax Advisory Service
For People Who Are Thinking of Making Their Home Somewhere Else.
Our Fee Basis
Our fees are agreed with you before we commence any work on your behalf and are based on what you require us to do. The fee we agree with you will be highly competitive in relation to the quality of the specialist advice and information we will provide.
Our initial service will include a meeting and/or telephone conference, a comprehensive written report and any follow up questions arising from the report within six months of its receipt by you. This may include a further meeting where required.
Once the fee is agreed it is payable in advance and there will not normally be any additional fee unless the matter expands into areas not originally envisaged in the original assignment.
For advice on these matters please contact
Jane Hayward at:
Blevins Franks Tax Advisory Service Ltd
Barbican House,
26-34 Old Street,
London EC1V 9QQ.
Tel: +41 (0)20 7336 1116
Fax:+41 (0)20 7336 1001
Email: jane.hayward@blevinsfranks.com
Internet: www.blevinsfranks.com © Blevins Franks – 2008
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