Taxable in France?

[journeyman]

Hello all, I was wondering if anyone could shed some light on a taxation issue..?

If you are a UK tax resident and pay your income tax and NI in the UK, and you own a 'residence secondaire' in France, would you fall into the French tax system if you were to (for example) sell a few bars of soap on the internet which you bought during your visit to your 'residence secondaire' - and posted them to buyers whilst you were in France? Perhaps to be a little clearer (and the soap is an example only) - you advertised them on a non French website in non French currency, and sold them to buyers in say the UK or Australia, would the income be considered taxable in France even though the revenue never entered French territory?

My reading of it was that this income would be declared to HMRC as it would arrive directly into the UK and I was a UK tax resident (and living primarily in the UK) or am I mistaken here?

Might the French address have an impact even though we are in the EU and have free trade agreements? If I brought the bars of soap back in my car to the UK instead for example, and re-sold them on the internet from there, would there be any difference? The supplier(s) of the soap(s) are assumed to have paid all of their own relevant dues..

The quantities of money involved here are not large, but the technicality has entered the arena, and I would be very grateful for any views or knowledge in this area..

Many thanks indeed.

[AnOther]

Welcome to the forum.

The short answer is probably yes.

The pivotal issue is that strictly speaking trading from France, even 'bars of soap' on the Internet, would be classed as working and that opens up a whole raft of questions - and not just about tax.

[parsnips]

Hi,

    In my opinion , as long as you remain a UK tax resident all your worldwide income (except that arising from fixed assets in France -ie.real estate) is taxable in the UK.  

[fluffy tree]

Journeyman,

You say you are 'UK tax resident', but you are thinking of buying goods in France, advertising them on the internet in France, and posting them from France to the UK. So, you must spend a fair amount of time at your residence secondaire, because it would be easier and cheaper on postage for you to advertise and sell your french goods when you returned to the UK with them.

So, has your UK Tax Residence actually been determined by HMRC?

Put simply -  if you are actually Resident/Ordinarily Resident in the UK for tax purposes - if you trade in the UK, it dosn't matter where in the world you bought the goods - your net profits will be chargeable in the UK. You would also be chargeable in the UK if you traded in France as HMRC would regard this as 'income from abroad' - so no win I'm afraid!

Plus, if you trade in France the french tax authorities will be interested too..........

   

[joidevie]

Are you a registered UK tax payer?

[journeyman]

Thank you for all of the valued responses which I appreciate very much..

To add a little more clarity, my current position is that I have been tax resident in the UK for my entire (working) life and pay income tax and NI contributions as self employed within the UK (and have always fully declared all earned income there). I spend some time in France, but am well outside of the 'enough to become resident in France' bracket and continue to work on work projects within the UK. I recently sold my previous 'residence secondaire' in France and paid the full 16% 'impots' on the capital gain to the French authorities due as a 'non resident' in France, and submitted HMRC paperwork to the notaire/tax office stating this. This was a significant sum, and one which in my view, underscores my residential status.

The question still arises in my mind however, of where one stands if one purchases goods (technically within the EU), and sells them within and beyond the EU (although ironically not within France itself) whilst 'on holiday' staying at 'one's residence secondaire'.. Especially if this income is fully declared to HMRC as one is a UK 'tax resident'..

Does this constitute 'working in France' or simply 'sourcing goods within the EU' and 'exporting worldwide' as part of one's business? The administration and banking takes place in the UK.

Surely you cannot be required to pay social charges in France for this, or be required to submit siret numbers? This would throw up all kinds of implications - for example if you were a musician, recorded some music with French (and other musicians) whilst traveling in France (and you happened to also won a second property there).. Would this be considered 'working' in France or 'purchasing/creating' 'material' there? (consider if that material was then distributed worldwide..).

Maybe I have this all wrong - or are there some clear references to what is considered 'income gained from within France' 'income gained from a fixed asset within France' (mentioned earlier) or 'EU freedom of trade/export/movement'?

Again, many thanks for any responses..

[Loiseau]

Hi journeyman, and welcome to the forum,

Strangely, musicians from abroad DO get taxed when performing in France...

My daughter and her baroque ensemble were paid to perform at a French music festival a few years ago. Their "cachet", or fee, was upped by a certain sum so that once the French tax/social charges due were knocked off (though they were all UK-resident) the cheques they actually received were for the lower sum initially agreed. 

They didn't even need to own a property there...

Sorry I can't advise you about the soap issue.

Angela

[journeyman]

Thanks again for the replies.

Perhaps the example of the musicians was slightly different as they were 'employed' by a venue and that venue presumably had to incorporate some type of PAYE equivalent within the fees?

Perhaps my position might more likely fall into self employment category involving free trade within the EU.. And it's associated implications?

Again, I look forward to any light that anyone can shed.

Many thanks.

[andyh4]

Journeyman

 

welcome.

 

One of the simple rules that will apply in well over 95% of all cases that come up is, "where were you when the work was done?"  If the answer is France, then technically the French authorities are likely to take an interest in the business activity and any taxes that it attracts - and not just your income. 

 

Where you are resident has little bearing on this.  Indeed you can be tax resident in a country and live out of a hotel - been there and got the badge thank you very much.  Also be aware that your statement about not being in France long enough to establish residence is based on a fallacy (oft quoted as the "183 day rule") - tax residence, can be estalished by a large number of factors and in the extreme, being here 1 day could render you tax liable.

 

You can also and easily become tax resident in several countries at the same time - been there and got that badge as well.

 

So to your soap questions:

If you source your soap from a French supplier, while operating as a UK company (self employed person), does this make you French tax resident? - in itself no.  Otherwise companies would have to be tax resdient in every country in the EU where they might conceivably source any material that they bought.  Note however, that a company who has an employee semi-permanently in France purchasing on its behalf, would find that that employee was French tax resident.  That would then have implications for the company being registered in France.  In your case as described however - no this does not make you tax resdient.

If you then plan your business while you are in France and do all of the background work and preparation in France, does this make you tax resident? - technically yes, but it would be difficult for anyone to prove this unless your length of residence in France was so long, that you could not possibly have done the work in the UK.  This for example might be a much more important point for someone who does training or consultancy work for UK customers but does all of the preparation while in France.

If you then advertise (and worse dispatch) your goods while in France, you have now left a trail that you are "working" in France and you would then need to be able to prove that this activity was ancilliary to your main business activities performed within the UK to avoid being taxed in France on the French activities.  Of course you would only need to prove this if the authorities came knocking.

 

If  buying and selling soap is your main line of business, and you conduct most of that business while in France then you will certainly be tax resident in France and will have left an easily auditable trail to trace that activity.

 

BTW - Your customer base, the currency of the operations, where your company is fronted, where you live etc.  have absolutely no bearing on your tax residency.

[NormanH]

I am very stupid when it comes to tax, so all I am doing is thinking aloud.

Presumably a UK business that buys French wine would have to send a buyer over to taste/discuss/purchase.

That person probably wouldn't have a house in France, and I am pretty sure there would be no social charges to pay for the activity of buying and exporting.

On another occasion the same person might come to France on holiday.

You have the complication of owning a property here.

However as this is for holiday use I see no reason why you shouldn't be able to separate the activities if the dates on the invoices were suitably  separated

Btw there is no PAYE in France, and someone employing someone, such as musicians does not take tax, only social charges.

[cooperlola]

When I worked for a big wine merchants in the UK, I regularly visited France and made verbal agreements to purchase large amounts of wine.  However, most of the real negotiations and paperwork were done back in the UK by the paper-pushers so I imagine it was that which swayed the tax thing, Norman (although it's some time ago, of course).   Certainly, we had nobody based in France even though we dealt with them all the time (and most other countries around the world for that matter).

[fluffy tree]

As we can see, this is becoming more complicated with each contributors scenario!

The legislation relating to UK Tax Residence status, and where income falls to be taxed, is extremely complex - as a previous contributor has pointed out - if only it was just down to the number of days in the UK! Even HMRC has a specialist department of technical experts to make residence determinations in all but the most simple cases, and many cases eventually end up with hearings before the Commissioners, the outcomes affecting future legislation.

My previous posting gave the simple answer in principal to your question, and Andy's advice to you is correct on the basis of the information you have given - but you cannot get a definitive answer without providing many more facts......too complex, and personal to get into on this forum!

 

[Loiseau]

[quote user="NormanH"]

... there is no PAYE in France, and someone employing someone, such as musicians does not take tax, only social charges.

[/quote]

No PAYE for employees, but it seems tax is taken direct from freelancers in France (whatever their country of residence) - the exact opposite of the system in the UK. 

I wrote a book that was published in France, and the publisher wanted to withhold tax before paying me my royalties, even though I am a UK resident.  (Ownership of a holiday home does not even come into it.)  

After investigation it turned out that royalties were a special case. But in order to be exempted from the automatic withholding of tax (and, maybe, social charges) I had to fill in a special form and have it stamped by the UK tax authorities to the effect that I was going to be declaring this income in the UK.  Then I sent the stamped form to the French publisher, and he was thenceforth OK about paying me the full amount of the royalties.

Angela

[Araucaria]

Quite a few countries have special tax rules for what they call "artistes and entertainers". These rules were mostly put in place back in the days when some big but obviously foreign rock star would turn up on tour, perform a few gigs for megabucks, and then leave without having any tax liability in the country where the performance took place.

I don't think these rules are much of a guide to what France would actually do if you continued your normal UK occupation for a few days when you were on holiday in France (and if the French authorities actually noticed). If it was a separate business which you only conducted when here in France, the answer might be different.

The OP might want to have a look at Article 5 of the UK-France Double Taxation Agreement, which is meant to describe what would and would not be regarded as a "permanent establishment" - effectively a French taxable branch of a UK business. It covers a number of the circumstances described by previous posters (eg buying wine in France for a UK business).

It's worth saying that you can easily have a tax liability for business activities in France without there being any possibility that you are resident in France. The French tax liability attaches both to people who are resident in France, and also (separately) to business activities carried on in France by non-residents.

[Loiseau]

Yes, letting out gites as a non-resident is a case in point.  I used to declare that income in France, pay tax on it there, and then tell HMRC how much so that they could take it into account when calculating my UK tax.

Angela

[journeyman]

This has all been incredibly interesting and helpful, if not a little complex as was mentioned earlier..

Something to look into more thoroughly, and no doubt throw out even more specifics..

Thanks to everyone.