Money column
Moving to France? Rob Kay looks at the key fi nancial considerations
A
re you planning to move to France or buy a holiday home and enjoy more time
there? Or perhaps you have recently arrived and are still in the process of settling in. Either way, it is an exciting time with much to look forward to. However, one downside
is dealing with foreign bureaucracy and navigating a new and particularly complex taxation and succession regime. But if you do your research and understand how it will all aff ect you, with early and careful planning you can prevent headaches and make the most of tax-effi cient opportunities. Here are the key tax
and fi nancial planning considerations to address.
WHERE YOU PAY TAX Establish if, and when, you will become liable for French taxation. Generally, once you arrive in France intending to live there permanently, you become French tax resident the following day. But it is not always so straightforward. You could be considered resident even if you do not live in France but your spouse does, or if your main home or economic interests are in France. Keep an eye too on the
UK Statutory Residence Test rules. You could, for example, unintentionally trigger UK tax residency by spending just 16 days back in Britain, and if you retain ties in the UK and exceed the number of days you can spend there in a year. If you plan carefully and
have some fl exibility, you may be able to time your residency switch to minimise taxes.
HOW YOU ARE TAXED Once you are tax resident in France, you become liable to pay tax on your worldwide
income, gains and real estate wealth. France applies tax to the household as a whole, based on the number of members, which can be benefi cial if one of you earns much more than the other or you have a few children living with you. Income is subject to both
income tax and social charges. Current personal income tax rates start at 11% for income over €11,294 and rise progressively to 45% for income over €177,106. Social charges are levied at
9.7% for employment income, 9.1% for pension income and 17.2% for investment income. Retirees with Form S1 escape social charges on pensions and pay a lower 7.5% rate on investment income. A reduced rate of 7.4% may apply to pension income for those with low incomes. Investment income benefi ts
from a 30% fi xed rate, covering both income tax and social charges (so 20.3% if you have an S1). You can opt for the scale rates if that works out better. France also imposes an
annual wealth tax on real estate assets if your property portfolio exceeds €1.3m, but there is a €800,000 allowance. With expert planning, it is
possible to structure savings, investments and assets to be tax-effi cient – and maybe even pay less tax in France than you did in the UK, depending on your circumstances.
NOTIFYING THE TAX AUTHORITIES You can use the HM Revenue & Customs Form P85 or your self- assessment tax return to advise them that you are leaving the UK. HMRC can then update your records and use the form to refund any overpaid tax for the year you leave. There may be other forms you need to
84 FRENCH PROPERTY NEWS: January /February 2024
“France applies tax to the household as a whole, which can be benefi cial if one of you
earns much more than the other or you have a few children”
fi ll in to get UK income paid gross (as you will be paying tax in France). For example, when it comes
to pension income, only government service pensions are taxed in the UK, all other pension income is taxed in France if you are resident there. You will need to fi le form FRA/ INDIVIDUAL (FD5) with your local French tax authorities, for it to be stamped. It should then be sent to HMRC to confi rm you are paying tax in France. Once you arrive in France
you need to make yourself known to the French tax
authorities – there are around 800 tax offi ces (centre des fi nances publiques) for resident taxpayers. Taxes are declared a year in arrears, so your fi rst tax return usually needs to be fi led the year after arrival. It is your responsibility to make yourself known to the French tax authorities and to fully declare your income, capital gains and property wealth.
PROPERTY CONSIDERATIONS Research and understand the tax implications before buying and selling property. Establish
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