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Tax advice needed for unusual working situation


mpin123
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I moved with my family to France a year ago; we sold up in the UK and own no property there and spend the vast majority of the time in France.  I was under the impression intially that there was no escape from becoming French domiciled (which was fine as we're planning on being here forever).

However, I am a freelance marketing consultant and all of my work is for businesses based in the UK - all income paid in sterling to a UK bank account.  As such, I was also advised that I am therefore liable to pay UK tak and NI rather than French.  Last year I did, indeed, complete a UK tax return and have kept my NI contributions up to date.

This situation doesn't make total sense to me and I think I'd be happier becoming part of the French system as a domicile so that we're covered for healthcare etc. (currently we pay here and claim back through the UK system, though we do have Carte Vitales). 

I have no idea how to structure my professional finances though, so that I'm recognised as a French tax payer.  Do I just become self-employed in France, even though my income comes from overseas and will continue to do so?

Any advice appreciated.

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A couple of things come to mind.

Firstly, like the rest of french residents you have to do a french tax declaration within the next few weeks for 2004. If it is your first one it will be up to you to get hold of this form from your tax office or local Mairie. There are penalties for them not being in on time.

Secondly, as you are working from here, shouldn't you be registered as working here anyway. Others will perhaps be able to guide you this.

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It is not clear whether you are working in France but for UK co's, or working in UK and going home to France. It may not make a difference for the self-employed. 

 I am interested in this thread because I am also a self employed marketing consultant.

I will send you more by PM

John

 

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I'd be very inerested in any replies to this, as at the moment I'm in UK and working for a Canadian company who pay me in £ to a UK bank. I would like to pay tax in France when we move as then we will be 'on the system', and getting the canadian co to pay into our french bank would not be an issue, but as the work is part-time/variable I don't want to end up paying lots of taxes on it.
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I see a lot of comments along the lines "I am paid in currency X into a bank account in country Y". As far as I'm aware which currency you are paid in and into a bank account of which country makes no difference to which country you are supposed to pay your tax. Does anyone know any different?

However I can see it might make a difference to whether the tax authority notices you...

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As I said, if you are a french resident then you must declare your worldwide income in France.

If you are working from France for a foreign company then you may well have to be registered as something or other in France, maybe as an agency for the foreign company or some other such thing. These could be costly options.

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A few points ;

If you work/live in France for more than x number of days a year (i.e. domicile status) then you need to pay your taxes here - regardless of where you are paid.

If you were on a contract which got extended and extended then it probably means you or your company will need to reclaim taxes paid in one country to pay the taxes in France. Note that this could actually be beneficial if the taxes you paid in the other country were significantly higher than in France (remember that income tax has dropped and awful lot in recent years in France).

As far as I am aware, it is only by working/paying tax in france for x number of days that you will be allowed to claim on the French social security (I know this because my partner was in this situation).

There are companies you help organise these things (my company used "Landwell Associates", in Paris) but you can probably find a lot of info yourself on taxationweb, etc. Also, you can arange to visit the tax centre in france who are usually very helpful.

good luck!

Regards,

-Rob-

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Your situation is less unusual than you think.

The first point is - how have you arranged your health care in France? It sounds as if you have a European social security form issued in UK, e.g. E106, which means you will be able to carry on paying into the UK system until this cover expires. That may not be strictly kosher, but it works in practice. However, as you have a carte vitale I'm not sure how or why you are claiming back from UK - I found that under my E forms (the now obsolescent E101/E128), I paid for medicines etc, the authorities refunded the relevant percentage to me, and they reclaimed that from DSS. People with no health cover, or who are using an E111, need to get into the French system ASAP.

Because you have lived in France for more than three months, you count as a resident and must get your affairs in order as a resident. Don't confuse domicile and residency - these are different things, with different definitions in UK and French tax laws. In UK you have to spend a certain number of days in the country to establish residency and/or domicile. In France it is sufficient for you to live here, or your dependants to live here, or your principal economic activity to be based in France (and by that we mean the place where your bum is on your seat while you work, not the location of the people who pay you).

From what you say it sounds as if you are self-employed rather than actually on an employment contract. If you are employed, your employer will need to establish a French subsidiary, basically for the purposes of paying you, and covering your social charges. So, most people working like you (and I) do, go self-employed.

Thus you need to register as a travailleur independante and pay cotisations (health insurance, retirement fund, professional taxes etc) accordingly. What you register as, and who with, depends on what you do. So your first port of call will be, most likely, the URSSAF offices for your département, who will set the ball rolling. The http://www.apce.com web site is also useful in helping to determine with whom you should register. There are companies that will guide you through this, but they charge heavily - something approaching 1500€ was quoted by one for what came down to a couple of phone calls and filling out a single-sheet A4 form in my case. You're going to ask me what the social charges are - there are fixed amounts for newly-registered business without previous French accounts, see the APCE and URSSAF (http://www.urssaf.fr) web sites.

If your income for the first financial year is comparatively small, you can be taxed as a micro-bic which makes things much simpler. If or when your income rises above this level (which varies according to your activity, the tax office will advise), then you really need to get an accountant. Strictly speaking, if you are above micro-bic levels, you must charge TVA, probably at 19.6%, but you can avoid this if all your clients are overseas-based, by putting a standard wording on your invoices - the tax office will advise.

I have been through most of this, so I can talk from actual experience rather than quoting something from a book or web site (which may not necessarily be up to date or totally correct).

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It would be worth you seeking the advice of a French accountant.  They were and continue to be, invaluable in assisting with the setting up of our business here in France.  A little more costly than UK based accountants, but money well spent.  The fact that they speak fairly good English is also a bonus. In the world of French taxation, chambres of commerce and all the usual cotisations only fluency will suffice.  Would happily recommend ours as a first point of call.
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Leaving aside the income tax situation, you need to be registered as a tax payer and have a tax number, otherwise, when you come to sell your house, it will not be classified as your main residence and the notaire will take capital gains tax on your sale. I have found the people in the tax offices very helpful, but dont expect them to speak much English.  good luck
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Hi

I'm happy to be shot down in flames, but this is my understanding :

Tax status :

Resident - non negotiable = more than 183 days residence in any one year (i.e. it is arithmetic)

Domicile - more complicated. To establish foreign domicile, you need to establish you have been abroad a significant time, have no accommodation available in UK, do not intend to return (reservation of a burial plot on foreign soil is accepted as evidence of this !)

The distinction is important because some taxes are levied on UK residents, others are levied on those domiciled in UK.

The only escape from UK tax is :

Born outside UK

Never been to UK

Own no assets in UK

No income in UK

Double taxation relief works like this :

You cannot choose where you pay the tax

You only pay tax once in each country

However if the country of residence has higher tax rates they can calculate your liability, deduct the taxes you have paid in the other country, and send a demand for the difference

Beware that if your country of residence has a tax not existing in the other country, say wealth tax, there can be no double taxation relief on that liability

Tax computations can be based on global income and the total income is used to calculate the appropriate tax rate

There are exemptions, particularly for pensions earned & paid in another country

Self employed consultants can register in France as Profession Liberale. This is taxed on the basis of income less allowable deductions. Social costs are based on a mixture of fixed and variable contributions, but it is very low in years of low profit. If they work mainly for VAT registered clients in another EU country, they will consistently reclaim TVA paid on costs in France. No need for any compulsory courses.

Hope that helps : shoot me down !

Peter

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Peter, your understanding of domicile and residence looks OK as far as Britain is concerned, but as I said in my earlier post, France and Britain apply different criteria. Although France does have a '183 days spent in the country' clause, there are additional qualifications that mean, effectively, if you live or work in France you are French tax resident, and can't escape it by being overseas for half the year. (At least, according to information from one financial specialist 'who is very familiar with Anglo-French questions and advertises in Living France).

This means that you can be tax resident in more than one country, which can be advantageous where dual taxation treaties are in existence.

However, we are getting into the realms where professional advice is needed. But in simple terms, if anybody reading this can qualify as a French tax resident, do make sure you fill in a French tax return, even if you aren't liable for tax or have paid all due tax in Britain. This will prove inavaluable when dealing with organisations like CPAM, or if you ever get involved in capital gains situations.

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Will

I agree that if you do not reside in any country for more than 183 days, you are in an interesting position !

In practise, the country where you are "ordinarily" (another definition !) resident would require the tax return.

The reason I'm nervous about giving any definitive advice is that my knowledge is out of date. I passed my tax exams in 1975 !

The best advice is from an international accountancy company regularly dealing with international tax. I used KPMG in Brussel. The hourly rates are high, but for most of us, the answer is to hand and they can solve problems very quickly.

"A man who is his own lawyer, has a fool as a client ?"

Peter

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Peter, I do so agree that it's invaluable to get knowledgeable help, particularly as things can change so regularly, and often surreptitiously, with changes in one country impacting on your affairs in another. I'm a great believer in it being well worth paying good money for good advice rather than wasting your resources trying to do things on the cheap (but some of the so-called 'tax specialists' are definitely taking the p***). You are quite right about domicile and residence being very complicated. It seems, to all intents and purposes, according to each country's rules, that it's easy to acquire domicile in France and very difficult to give up UK domicile, particularly if you keep an address there, like we do.

As I believe I am correct in thinking that you can only be domiciled in one country it does make for an interesting debate. A bit like the 183 day rule, which I remember when I was doing contract work was bent by many of my colleagues who would split their working year between England and (usually) Germany, which, living in rented property and with a holiday period in between each session, meant they were not anywhere for long enough to pay income tax - that came up recently on this forum and I was amazed to find out it was still going on.

When we all had to have a carte de sejour it did make things easier, as although it certainly didn't apply that if you had a carte de sejour you were tax resident in France, and if you didn't, you weren't, that principle applied in most normal circumstances.

You also raise the very good points about still being liable for UK taxes even though you are not resident in UK, about the need to declare your global income where French taxation is returned (though any tax already paid in a country with a dual taxation agreement with France is taken into account) and the very relevant French wealth tax, which applies to global assets of (latest figure I have) 720,000€ or more, which if you have properties in UK and France, plus any investments or savings, you definitely need to consider.

You don't look from your picture on another forum as if you could have passed your exams 30 years ago. Mrs Conq, before she got involved in selling houses in France, was a staff trainer for the Inland Revenue in London, so we have, and try to maintain, a bit of an interest in the subject - particularly as I found myself in very much the same position as the original questioner here.

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"You don't look from your picture on another forum as if you could have passed your exams 30 years ago"

What a perceptive and kind chap you are, although maybe short sighted.

I signed articles (to train as a chartered accountant) in September 1971. Of course, I was very young !

I put it down to clean, healthy living and the love of a good woman, or possibly a very small and out of focus photo ?

Peter

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the problem I can see is this:

I would like to work through a portage salariale company so all my taxes, etc are taken care of but to set up the initial contract I need all my social numbers, etc, as a resident of France. I can't get those numbers (and on the system) until I have worked in France. We're moving over in 'gulp' 10 days time, I have a contract with a company in Canada in the offing for part-time but variable hours work, so how do I sign up with the portage company?
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 my husbands bum will be in the middel of the north sea for 8 months of the year when hes working ,rest of the time spent in france ,we have no property in the uk .we are in are early 50s  with no dependants, where would that leave us in the tax situation. any help appeciated,

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