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Contents
Introduction 4
Have you actually left the UK? 5
The 91 day rule... 6
Are you paying tax in the right place? 7
What about the UK/France Tax Treaty? 8
Are your investments tax efficient for you? 9
What about your rental income? 10
What about offshore bank interest? 11
What are social charges? 12
Who is going to inherit your assets? 13
What about your Will? 14
Who is going to pay the tax when you die? 15
What is wealth tax all about? 16
What if you are not married? 16
What about UK civil partners? 17
Summary 18
Rates of Tax
Income Tax Scale Rates for 2008 Income 19
Social Charge Rates for 2009 Income 19
Wealth Tax Rates for 2009 20
Succession Tax Rates for 2009 20 - 21
Gift Tax Exemptions 2009 21
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Introduction
Moving abroad is something that many Britons yearn to do, and France is a very
popular destination for many of them.
Yet how much do you know about the tax implications of moving to France?
This guide looks at many of the issues facing people moving from the UK to France,
to raise awareness of things that may affect you. Depending on your circumstances,
however, there are likely to be things that you can do to minimise the problems,
and you may even find that you can reduce your tax liability by moving to France!
You should always take advice when looking to purchase property in and/or moving
to any country, and in particular France, where many of the taxes sound the same,
but are calculated completely differently to similar taxes in the UK. There are even
The Blevins Franks Guide to Taxes in FRANCE | January 2010
taxes which do not exist in the UK e.g. wealth tax, and, for some people, healthcare
charges. An adviser with a good understanding of both jurisdictions can help you to
work out how to make your money work for you, protecting it against foreign taxes,
and how to make the most of the opportunities available.
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There is no statutory definition of ‘residence’ in the UK, and the rules have been
developed over many years and court cases. Residence is a matter of physical presence
in a country, either in terms of time spent there, or the quality of the time spent there;
thus, as in the case of France, even if you spend less than half of a French tax year (the
calendar year) in France, the French will see you as resident there if your main home is
in France.
The UK has time-based residence rules: if you spend more than 183 days in the UK
during a UK tax year, which is a statutory test, or more than 91 days per UK tax year
(averaged over four UK tax years) in the UK, you are UK resident.
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Secondly, even if you spend far less than 91 days in the UK each year, you still may not
have left the UK. You first have to leave the UK permanently for a settled purpose. UK
case law is littered with stories of people who claimed they had left the UK, and spent
less than 91 days there, but were found by UK Courts to have remained UK tax resident.
Examples of individuals who were in the UK for less than 91 days, yet were found to have
remained UK resident include Mr Shepherd, the airline pilot who unsuccessfully claimed
he was resident in Cyprus; Robert Gaines-Cooper who claimed to be resident in the
Seychelles; and Mr Grace, another airline pilot claiming to be resident in South Africa.
The quality of your connections with the UK still count – an individual whose family all
live in the UK but who works abroad and commutes back to the UK on some weekends
could still well be UK resident. So day counting, in itself, is not always an accurate guide
The Blevins Franks Guide to Taxes in FRANCE | January 2010
What will your position be if you retain a property in the UK? Could it be argued that your
property overseas is much more of a holiday home rather than a permanent home base?
Even where you satisfy the domestic residence criteria of France, as well as the UK
domestic rules, under the terms of the UK/France Double Tax Treaty, you can only
be resident in either country at any one time, and the Treaty has ‘tie-breaker’ rules to
establish where you are resident. It might be dangerous to rely on the tie-breaker rules,
as circumstances can change, often from year to year – sometimes, all it could take is a
bout of serious illness, and your residence position could change, and you haven’t taken
advice or prepared for it. Also, your interpretation of the rules might not be the same as
those of the tax authorities in the country in which you are claiming not to be resident.
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People who do this may end up paying more tax than they should be, and had they taken
advice before they left the UK, could have put into place tax-efficient structures for their
money, saving them taxes and increasing their available income.
If you are traced by the authorities in France and have not submitted appropriate French
tax returns, or have under-declared your income because you are paying tax in the UK
and believe that you don’t need to declare the income in France, this will be treated very
seriously by the French tax inspector. It is treated as tax evasion, however innocently
arrived at, giving rise to penalties and interest on any underpaid tax.
Declaring that you have paid tax in the UK on income which is actually taxable in France
Whilst you might be working in the UK for a UK employer or performing self employment
activities in the UK, you may still have a tax liability in France, not the UK, and you could
find that you have been paying social security to the wrong country. This can affect
your healthcare, state retirement pensions, and other social welfare benefits. Again,
there may be penalties and interest due on any underpaid social security. By getting
this wrong, you can cost yourself, and possibly your employer, a lot of money as well as
losing healthcare, social security and pension rights.
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Also, where income or gains are taxed in both countries, although you can offset the tax
paid in, say, the UK against the tax due in France, if the tax payable in the UK is higher,
you will not get a refund of the difference in France. So ideally, if you can avoid paying
the higher UK rate altogether, you can reduce your tax bill this way. However, just not
paying the UK tax is not an option, so you need to take advice to make all of your income
as tax efficient as possible.
In some cases, however, relief from double taxation is given in a different way. Some
types of UK-source income are not directly taxable in France, but must be declared there
as it is taken into account to calculate the rate of tax payable on other income which is
directly taxable in France.
The Blevins Franks Guide to Taxes in FRANCE | January 2010
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This income remains taxable in the UK, and must be reported there each year on a UK
tax return.
But this income is also taken into account in France, and whilst not directly taxed there,
is added to other income that is directly taxed in France (such as pension or savings
income) to calculate the effective rate of tax that should be applied to the income directly
taxable in France, an addition known in France as the taux effectif. Such income is also
directly subject to French social charges at 12.1%.
Under the new UK/France Double Tax Treaty which came into force in France from 1st
January 2010, gains arising on UK properties are now subject to French capital gains tax
at 28.1% including social charges. Previously the gain was not taxed in France.
There are alternative methods of investment available to residents of France that are
much more tax-efficient, and even where a property is not selling or being sold, it is worth
taking advice to see if there is anything that can be done to mitigate taxes and social
The Blevins Franks Guide to Taxes in FRANCE | January 2010
charges.
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Under the terms of the EU Savings Tax Directive, there are two options available to those
who have accounts in the many non-EU signatories to the Directive, e.g. Switzerland,
Isle of Man, Channel Islands etc.
Under the first option, you can choose not to have details of the account(s) exchanged with
France, in which case tax will be deducted at source, currently at 20%, and increasing to
35% of the income from 1st July 2011. If you opt for this, failure to declare the existence
of the bank account to the French authorities will attract a fine of up to €10,000 per
undeclared account per year if discovered. In addition, failure to declare the income to
Alternatively, you can opt for exchange of information regarding the account with France,
in which case you will receive the income gross. Again, any failure to declare the account
or income in France will be penalised.
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Social charges are payable at rates of 12.1% on all investment income, such as interest,
gross dividends and rental income, and also on capital gains. A lower rate of 8% is
payable on employment and self-employment income (this is the only income that is
subject to social security contributions – the French equivalent of UK National Insurance
contributions – in France), and finally, 7.1% of pension income. Many UK nationals
moving to France who have not yet reached UK state pension age can be caught by this,
if they are in receipt of pension income when they move to France.
The Blevins Franks Guide to Taxes in FRANCE | January 2010
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A UK Will must go through the probate process in the UK, after which it needs to be
translated and notarised and then go through the probate process in France. Thus
this can take a significant amount of time before a Will can be finalised and the assets
distributed. This is also a very costly process.
If you set up a French Will for French assets, this may inadvertently revoke your UK Will,
leaving your assets intestate, which can take a lot of time to sort out. Alternatively, the new
French Will may be at odds with your existing UK one, leading to disputes between your
heirs, which again may be expensive and costly to resolve. Taking advice can solve these
problems, ensuring that any transfer by Will goes as smoothly as possible for your survivors.
The Blevins Franks Guide to Taxes in FRANCE | January 2010
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It is the person who receives the assets, whether by way of lifetime gift or as a bequest,
who is liable to pay the tax (unlike the UK, where the estate pays the tax, unless
specifically provided for in the Will). However, as in the UK, the ownership of an asset
cannot be transferred until the tax is paid, and as you cannot sell the asset to pay the
tax, problems can arise for the beneficiaries in France, where tax usually has to be paid
within six months of the death.
So as you can see, it is not only the laws that apply on death that are different from the
UK, taxes on death are also different.
However, there are measures you can take to avoid both French succession law and
minimise (if not avoid) French succession tax completely. As you would expect, planning
can start early, even before you actually purchase a property in the first place, and getting
There is also the additional problem, that if you should die owning UK assets, not only
French succession tax may be due on those assets, UK inheritance tax might be due
on those assets as well. There is a double tax treaty specifically on tax on death (so
this doesn’t cover lifetime gifts), but situations can arise whereby tax can be due in both
countries, but on different events – and in this case, as the tax isn’t due in both countries
on the same event, there can be no offset of tax paid in one country against the tax due
in the other country. This is where careful planning can help, so that the people you want
to inherit your assets can do so at a minimum of tax, meaning that more of your money
goes to them, and less to the governments of either France or the UK.
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The rules have changed recently and the effect of this tax can be mitigated by taking
advice, particularly before you move if you are intending to move to France. Even if you
are not planning on moving to France, it is sensible to take advice to see if this tax will
affect you, and how.
allows a family to utilise the lower rate bands of all members of the household.
However, unmarried couples are treated as one household for wealth tax purposes, so if
you are living together, unmarried partners effectively get the worst of all worlds – unable
to take advantage of the income tax benefits, and subject to high rates of tax on death,
whilst being subject to the wealth tax limitations.
There are ways around this, and they don’t necessarily involve being married, but if you
are unprepared for this when you move, the consequences can be terrible when the first
partner dies, as the survivor will have no automatic right to inherit assets, particularly if
the deceased has children, and may have to pay 60% tax on assets inherited from the
first deceased.
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A UK civil partnership is now recognised in France. This means that if you are already in
a UK civil partnership, you will be treated as PACS partners in France for tax purposes.
Prior to April 2009, a UK civil partnership was not recognised in France, and you were not
able to enter into a PACS unless the UK civil partnership was dissolved first.
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Summary
There are many issues facing UK nationals looking to buy property in and move to
France, and a lot of these can be dealt with very easily, in many cases, provided
you take advice. However, to make the most out of such a purchase or move, the
adviser needs to be cognizant of both French and UK tax law, as something that
can save you tax in the UK can have the opposite effect in France, and vice versa.
There is no one solution for everyone, because each situation is different, and it is
important to do your research, but there is no substitute for advice tailored to your
specific circumstances.
The Blevins Franks Guide to Taxes in FRANCE | January 2010
Despite the reputation that France has for high taxation, this is not always true, and
many of our clients have found this out to their benefit...
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Rates of Tax
Income Tax Scale Rates for 2009 Income
Net Income Subject to Tax Band Tax Rate Tax on Band Cumulative Tax
€ € €
Up to €5,875 5,875 Nil
€5,876 to €11,720 5,844 5.5% 321 321
€11,721 to €26,030 14,309 14% 2,003 2,324
€26,031 to €69,783 43,752 30% 13,126 15,450
Over €69,783 40%
Income tax rates are usually only set at the end of the tax year to which they relate, or
sometimes even after the tax year is over. They are very rarely set in advance of the
relevant tax year starting.
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Taxable Inheritance Brothers & Sisters Other relatives to the More remote and
4th degree non-relatives
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Tax Planning
Investment Management
Asset Protection
Trustees
Retirement Planning
Pensions
QROPS
Foreign Exchange
Domicile Determination
UK Tax Residents Living Abroad
Tax Residency
Expatriates Returning To The UK
This guide has been prepared based on the laws of the UK and France
as at 25th January 2010. It is a general guide only and, in explaining
complex matters in a simple way, cannot be relied upon as a substitute
for professional advice. Blevins Franks cannot accept any responsibility
for loss occasioned by any person’s action (or refraining from action) as
a result of reading this guide. You must take detailed professional advice
relevant to your particular circumstances before any action is taken.
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