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Working for my UK Ltd company as a French resident


jules
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My wife and I have an Internet based business which is a private limited company in the UK. My wife and I are sole directors, and receive a small directors salary from the company, the rest of the benefits being as dividends on which we don't pay income tax because tax has already been paid by the company. I am trying to find out whether this arrangement would continue to be the best option, or even possible, were we to move permanently to France. We work entirely from the end of an Internet connection and there are no UK premises: the web server we use is located in the USA, as are many of the businesses we earn money from.

Although several posts suggest that if you are working from France everything has to be based in France, the advice given at the end of this posting here suggests that it is possible to continue to work as we do now. However, I'm not sure what the statement "you or your other half must not be 'gerant majoritaire', i.e. adding your div shares together must not receive more than 49%" means, and whether that would rule us out. The alternatives, presumably, are to de-incorporate the company and then either set up a French limited company (I'm guessing this could be expensive, as I've read that France isn't as small-business friendly as the UK) or just work as self employed in France. One reason I'm not keen on this is that it would not be transparent to the various people who provide our income, and we might lose some customers on the way.

Various posts about high costs and bureaucracy show the reason why although I have dreamed about relocating to France or Spain for many years it has always seemed easiest in the end to stay in the UK and just go for holidays. Unfortunately we could never afford a second home abroad, and it's a hassle trying to find places with broadband access and remembering to take everything with us that we might need if something goes wrong while we are away, so we don't escape the UK as often as we need to. The lousy weather and total dissatisfaction with the health service here in Cumbria has finally made me consider taking the plunge and relocating, but we need to understand the effect such a move would have on our income, and whether the reputed lower cost of living in France would be negated by higher taxes.

The bottom line, I need a rough idea of what the costs are likely to be. Our company currently has a turnover of just over £30,000. What would we expect to pay in taxes and accountants' fees on a similar income if the business was registered as a French company, or if we operated as self employed?

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From everything I've read, you may as well move your entire operation to France. Three major reasons

The main costs for a small turnover operation are actually the cotisations (equivalent to NI payments) rather than the taxes.

In France you pay some cotisations on dividend income, including that received from abroad.

If you work in France for a foreign company you must create a French subsidiary through which you (as French-based workers) must be employed.

It may or may not be worth setting up a SARL (Ltd) for your business. I have heard of tax advantages in some cases, but you'd need to talk to an accountant. Otherwise you would probably register as profession liberale -- freelance professional.

Recently announced reforms may actually make starting a business in France less unattractive (note careful wording!) but I don't know when they are expected to take effect.

At the end of it all, you need to work out how much of your turnover would end up in your pockets in France compared to the UK, then factor in things like cost of living for your lifestyle and any property gains -- Cumbria ain't the Home Counties but you may still earn on swapping a UK home for a French one.

Finally, my accountant believes that the benefit of running a Ltd only outweighs being self-employed once you get to about £40K, so maybe you should review your UK operation anyway.

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I don't fully understand all of the ins and outs of the 'gerant majoritaire' business, but it has been discussed on another forum and seems to apply to companies set up in France which employ people other than the directors (who can do very little when in France), so is of very limited advantage to most, and pretty useless for the self-employed in France. But you would need to take professional advice. In fact it is essential to do this anyway because there is a lot of misleading information on the internet, particularly in forums. Businesses in France have to be set up very carefully; getting something even slightly wrong can prove very costly.

Plenty of people get scared by the high costs of having your own business in France and think they can find clever ways around them. But at the end of the line, you have to accept that if you operate in France you have to pay in France. For a profession liberale the cotisations amount to about 46% of taxable income. Then you pay tax on what is left. There is no way round it. It doesn't mater what is the nature of your work, or where your clients are, or what currency they pay you in. The system dictates that if you are physically in France when you do the work, you pay in France.

Just get yourself a good acountant - that's the only way to  not pay more than you have to. You should find that the savings more than outweigh the fees you have to pay.

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Thanks for the replies.

> In France you pay some cotisations on dividend income, including that received from abroad.

So we would pay tax twice, once in France and once in the UK. I was afraid of that.

> For a profession liberale the cotisations amount to about 46% of taxable income. Then you pay tax on what is left. There is no way round it.

This is the scariest bit of advice I've seen. 46% tax is way higher than anything we pay in the UK. Most of the business turnover is profit because the deductions - renting a web server, telephone charges, the occasional computer or software upgrade - are quite small. Isn't it demoralizing for people to see more than half their income being taken by the state?

> Cumbria ain't the Home Counties but you may still earn on swapping a UK home for a French one.

I don't think we'll have much change left out of selling a £200,000 house, especially as the area we would prefer to go to - Provence, where I have an elderly relative - is not one of the cheapest places in France we could go to.

> Just get yourself a good acountant - that's the only way to not pay more than you have to.

I certainly will once - if - we are there. But at the moment we are at the feasibility study stage. What I have learned so far only confirms that finding out how much tax we would have to pay and how much money we would have left to live on is vital to the decision making process. But it's not so easy to get this information while we are not in France and it is just a theoretical matter.
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The taxes on businesses here are indeed demoralising.  My French electrician/plumber friend talks about little else!  I believe it is the reason why so many French start up small businesses in the UK - I have a close friend in my former home town in the UK (a French carpenter) who has done just this and for exactly those reasons.  More proof, if such were needed, that your approach of doing all your sums before taking the plunge, will pay huge dividends in the future.
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I just came across this page while trying to find a definition of what "cotisations" are. This has thrown another spanner in the works by suggesting that if you are self employed you must only work at one thing or else you must operate (and pay cotisations on) separate businesses. Although our main income comes from websites I also write a column for a computer magazine, and do ad-hoc software development. I don't think the Inland Revenue would care if I cleaned windows some of the time as long as I declared the income from it.

I thought one of the reasons people moved to France was for a less stressful existence...

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