FAQ When moving to France

The most common questions you as an expat might have when moving abroad are about tax obligations, currency, pension options, will, estate planning, savings and investments, and, of course, Brexit.

We have asked Ben Noifeld and Simon Baker, both Senior Wealth Managers at Abbey Wealth, to host our Expat Financial FAQs section so that you can benefit from their expertise and experience.

Simon and Ben specialise in providing compliant tax-efficient savings, investment and pension solutions for people living in the EU.

How long do I need to spend in France to become a French tax resident?

The French tax authorities consider you tax resident if you meet one of the following criteria:

• you spend more than 183 days in France during one year or you spend more days in France than any other country;
• your main home is in France or France is your main place of economic activity.

Does France and the UK have a Double Tax Treaty?

Yes, but this allows you to be tax resident only in one country at any one time.

The Double Tax Treaty can prove beneficial in helping you manage your finances and reducing your liability, but only if you understand and follow the guidelines.

For example, it is possible to offset tax paid in one country in the other, but it is not always possible to get a refund if you have paid tax in the country with the higher rate.

It is far better to plan ahead and to avoid the higher liability in the first place.

The UK/France Double Tax Treaty is in place to prevent income being taxed in both countries; however, it is possible to pay tax in the wrong country and to consequently pay more than you need to.

There are other ways you can receive relief from double Tax Treaty.

For example, if you receive income from UK rental property or a government service pension, you may be able to report this to the French authorities as part of your taxable income. It is important that you plan for this as mistakes can be treated and punished as tax evasion.

Do I need to contact the French Tax Authorities when I relocate to France?

Yes, when you move to France it is essential that you contact the authorities to declare your residency and tax status. You should report all your income, savings and pensions. Failure to do so could result in you breaking the law and incurring a penalty.

Are my UK ISAs tax-free in France?

Individual Savings Accounts (ISAs) are tax-free in the UK. However, they may attract considerable tax liability in France, as well as ‘social charges’ so you may want to restructure any investments of this type before your move to France.

A suitable alternative for a French resident would be to transfer your ISA into a French approved/compliant investment vehicle, such as an Assurance Vie. Whilst most domestic contracts are only available in Euros, offshore contracts such as those located in Dublin and Luxembourg are far more flexible in terms of currency and investment choice.

Do I need to contact the French Tax Authorities when I relocate to France?

French tax residents are subject to tax on their worldwide income. This includes bank interest arising anywhere in the world, even if you never use the accounts or withdraw any interest you earn.

All accounts, wherever they are situated and regardless of whether they are taxed at source, should be declared to the French authorities.

France is a signatory to the Common Reporting Standard, under which almost 100 jurisdictions automatically exchange tax and financial information on a global level. Failure to declare could result in significant fines and penalties.

Do I need to contact the French Tax Authorities when I relocate to France?

No, French Succession Laws can be problematic for expats in the country.

The rules are even more complex for those who have children from previous marriages or former relationships, and even for those who would rather their spouse inherited the majority of their estate in preference to their children.

As such, careful planning in relation to succession laws and inheritance taxes is essential.

What’s the best way to save and invest my money when I become a tax resident in France?

When it comes to personal tax and estate planning, life assurance (assurance-vie) is one of the most widely used services. Life assurance offers valuable advantages for French tax residents, no matter their nationality.

Why is life assurance more beneficial when it comes to taxation when compared to standard saving schemes?

You will have more options and more control over when and what you pay:

• With life assurance, the tax will be deferred on income and gains until you withdraw the funds
• You can also choose whether to be taxed at standard income tax rates plus a social contribution or at the flat tax rate of 30 percent
• Your tax on gains can be reduced depending on the number of years you have been holding your life assurance contract

Can I use life assurance for inheritance planning?

Absolutely. With life assurance, you don’t have to follow the French heirship rules, which state that certain heirs have to receive at least a portion of the estate regardless of your will.

This means you can leave the funds of your life assurance to anyone, although there are certain exceptions.

British citizens can also opt to use the inheritance law of their nationality in their will. Brexit should not impact this rule.

Can I reduce succession tax with the help of life assurance?

Your policy should be funded prior to your 70th birthday. It’s possible to bring down succession tax rates from a maximum of 60 percent to 20 or 31.25 percent with a reduction of €152,500 per designated beneficiary.

What happens to my life assurance policy if I want to move to another country?

Your life assurance remains portable whether you want to return to your home country or move elsewhere.

If I die in France, are my beneficiaries liable for French inheritance tax?

In France, it is the beneficiary that is taxed rather than your estate. The relevant allowances and tax rates will be determined by their relationship to you.

With the right advice and structuring of your assets, succession tax rates of up to 60% can be substituted for the lower beneficiary tax rates of 20% or 31.25%, with a reduction of €152,500 per designated beneficiary.

Will my beneficiaries have to pay inheritance tax in the UK and France?

France and the UK have a double tax treaty regarding inheritance tax. Any tax paid in one country would be considered a credit in the other in order to avoid double taxation.

I am retired, do I need to pay social charges in France?

If you are of state pension age and have not paid social charges in France before, you should be able to obtain a form S1 health card from DWP. This means you may not need to pay social charges in France. However, top-up health insurance may be required to ensure you have full healthcare cover in France. If you reside in France during your working life or before normal retirement age (state pension age), you may be required to pay social charges on taxable income. If you receive the right financial advice and your assets are structured well, charges/taxes could be deferred and/or reduced.

If I sell my main residence in the UK after I have moved to France, will I be liable for the UK and French Capital Gains Tax?

If you sell your UK property while living as a French tax resident, you should be exempt from being taxed on the sale, providing you sell the property within 12 months of it being put on the market. In the UK, the exemption will apply in full if the property is sold within 9 months (previously 18 months).