French Tax Resident

[Konrad]

I will be visiting France several times during this year to work on a house. It is likely if I added it up that I would be in France for over 6 months during the year, therefore making me French tax resident - I think. Next year I may be here for less than 6 months. Am I responsible for flagging my residency up to the authorities this year and if so what do I do next year, presumably I will revert back to UK tax resident. Apart from me and presumably UK or French customs does anyone else track my time in the Country. Am I better off just keeping a low profile.

[BJSLIV]

Am I better off just keeping a low profile

You said it!

As you won't be earning in France and won't escape the clutches of HMRC it's very unlikely that you would have any liability in France , so I can't imagine that the French authorities would be interested in your comings and goings. On the other hand if you are a multimillionaire and liable to wealth tax......

You would also have to bear in mind the complications with health cover if you were to "leave" the UK.

 

 

[AnOther]

[quote user="Konrad"]I will be visiting France several times during this year to work on a house. It is likely if I added it up that I would be in France for over 6 months during the year, therefore making me French tax resident - I think.[/quote]You think wrong Konrad. This misconception about 6 months or 183 days making you French tax resident just runs and runs but is nonsense.

There are a raft of other criteria which determine tax residency and in fact nothing in the French rules even mentions 183 days. In any case it would be a CONTINUOUS period not an accumulation from a hotch potch of trips back and forth so you have no need to duck and dive to keep a 'low profile'

I recommend you read THIS

[Tony F Dordogne]

Your house or somebody elses, that could put a whole new slant on things?

[Will]

Just a thought - if you did decide to make a tax return in France, it would establish your residence for the future. For instance it could avoid liability for capital gains tax in France should you sell your house in future, and it could count towards your five year's residence should you need to establish that in order to join the health care system. Even if you have no taxable income in France you would still need to declare your world wide income to the French authorities, but employment income, public service pensions etc are taxable in Britain so under the double taxation agreement would not be taxable again in France. You would need proper advice because we are getting into the realms of creative accounting here, but it may be worth a thought. On the other hand, if you, as a 'resident' spend a lot of time working on a house which you then sell you could be deemed to be carrying out a business (marchand de biens) with all that entails.

[Konrad]

Thanks for all your help. I also found the Kentingtons article really useful and very clear so I am sure I now know where I stand.

[bigears]

Will, how would konrad sort out his health provision if he elects to make a french tax declaration? Surely this aspect needs to be talked about.

[allanb]

[quote user="Will"]Just a thought - if you did decide to make a tax return in France, it would establish your residence for the future. [/quote]With respect, I don't think you can rely on that.  There are four specific criteria for being deemed resident under French tax law, and filing a French tax return isn't one of them. 

I would say that filing a return doesn't determine residence, it's a consequence of residence.

[mint]

[quote user="allanb"][quote user="Will"]Just a thought - if you did decide to make a tax return in France, it would establish your residence for the future. [/quote]With respect, I don't think you can rely on that.  There are four specific criteria for being deemed resident under French tax law, and filing a French tax return isn't one of them. 

I would say that filing a return doesn't determine residence, it's a consequence of residence.
[/quote]

Nice distinction that, allanb. 

If it doesn't run to pages, why don't you just list the 4 specific criteria for the edification of the OP as well as the rest of us? 

[allanb]

[quote user="sweet 17"]Nice distinction that, allanb. 

If it doesn't run to pages, why don't you just list the 4 specific criteria for the edification of the OP as well as the rest of us?[/quote]I'm sorry, I wasn't trying to be obscure, but the rules have appeared several times before on this forum.  Here they are again (only one of many suggested translations):

You are considered to be resident under the French tax code if any one of the following is true:

- You have a permanent home or principal place of sejour in France.


- You spend more than 183 days in France during a calendar year or spend more time in France that any other country.


- You carry out an occupation or are employed in France, except where this is incidental to a foreign activity.


- Your centre of economic interest is in France.

I'm not sure what you mean by a "nice" distinction; it's a pretty important one.  "You have to file a tax return if you're resident" or "You become resident if you file a tax return" - quite a difference, isn't there?

[mint]

Thank you, allanb.  I shall try and remember the conditions of residence for when I'm explaining just such an issue for others that I meet in daily life.

When I said "a nice distinction", I meant it to be complimentary:  nice as in fine or subtle or requiring careful thought or attention (OUD definition which I have just looked up!)

I admired the way you put it and it was immediately clear to me, so no probs there.[:)]

[AnOther]

It's useful to see those items listed allanb but I think it's potentially misleading to infer that things are as clear cut as they would suggest. I would particularly take issue with the claim that items 1 or 2 would prove definitive in themselves. I keep coming back to it but I still believe that the Kenningtons piece is as close as it gets to a real world summary for the majority. For instance, as it points out, even if your French house were your permanant residence if you had another house, in UK or elsewhere, which was available to you then that would not automatically make you resident without one or more of the other item coming into play.

Once again though I point out that the article says that nowhere do the French residency rules specifically mention 183 days or any other period.

Quote" that the main laws defining residency of France do not even mention the number of days spent in the country"

If anybody can gain say that, quoting the authority, then by all means please do so.

[bigears]

hi

For this type of stay in france, I wouls say that the best way forward is to maintain uk residency. Do not get hung up on a set figure of a certain number of days, also be careful you do not abuse your status in france by e.g. earning money or staying for very long periods without going back to the uk. Keep the centre of your economic and family interest in the uk and you will be ok. For me, some on this forum have been making misleading/innappropriate pronouncements on this type of situation for years. AnOther is not one of them.

[Cat]

As far as the French code général des impots goes, these are the rules.

If these rules are not sufficient to judge where a person is fiscally resident, the the new UK/France double taxation treaty says...

RESIDENCE

1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof, and any statutory body of that State, subdivision or authority. This term does not include any person who is liable to tax in that State in respect only of income or capital gains from sources in that State.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules:

(a) he shall be deemed to be a resident only of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);

(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;

(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;

(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the States shall settle the question by mutual agreement.

Source http://www.ambafrance-uk.org/IMG/pdf_Convention_ID_2008_-_ANG.pdf

This treaty (although signed) has not yet come into effect, the rules are pretty much the same as in the old treaty though.  The only mention of 183 days in both documents is to determine where tax on income from employment is to be paid, and has nothing to do with establishing fiscal residency.

 

The 183 day rule applies only to income derived from employment, and comes from the soon to be replaced UK/France double taxation treaty...

article 15

 

 (1) Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State.  If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

(2) Notwithstanding the provisions of paragraph (1), remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any period of 12 months; and

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

(3) Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

 

Source http://www.franceaccountants.com/UK%20France%20double%20tax%20treaty.htm

 

The new double taxation treaty takes the same view of the 183 day rule...

INCOME FROM EMPLOYMENT

1. Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days within any period of 12 months; and

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

(c) the remuneration is not borne by a permanent establishment which the employer has in the other State.

[Will]

To answer the points - yes, allanb is quite right in that filing a tax return does not in itself determine tax residence. However, it is a bit of a moot point because you have to be tax resident in order to make a return, and if the OP qualifies as resident under one of allanb's criteria, or any of the others which count, then filing a tax return will establish that residence for capital gains etc purposes. It's not an important issue, but one that could be useful in the future, and I have seen enough people try to live 'under the radar' in France but fall foul of things when they come to sell up or enter the health system.

The Kennington guide is a good basic summary, but there are a lot of things that it doesn't mention, or glosses over.

I deliberately didn't directly mention the OP's health cover, as tax and social security residence criteria are totally different, and it is quite possible to be French fiscally resident but have health cover from UK (that is fact - I am in this position). If the OP spends more time in France than anywhere else, then the French authorities may well chase him for payment of social security contributions; this is one reason what proper advice is essential.

In fact proper advice on all taxation and health cover issues is highly desirable - relying on forum advice, or even a short internet summary written by a specialist is not sufficient as not everybody's situation can be thus covered.

[bigears]

Will, so I, a uk resident (non active early retired) can file a tax return in france as a result of staying for 8 months a year in france and receive nhs treatment in the uk and presumably treatment in france via a uk ehic? Does the french house still have the status as maison secondaire? If this would allow us to sell our french property in a couple of years time without incurring any capytal gains tax I would certainly consider doing it. Does the selling notaire only check that you are fiscally resident in france rather than also chech the status of your property and where your health is provided?

[gosub]

[quote user="Will"]

To answer the points - yes, allanb is quite right in that filing a tax return does not in itself determine tax residence. However, it is a bit of a moot point because you have to be tax resident in order to make a return,

[/quote]

I think it would make it easier to understand if it was put it this way.

Everyone who is resident in France is obliged to submit a tax return.

You are also obliged to submit a tax return if you are non-resident, but

you have earnings from France.

[Will]

Bigears - you cannot choose where you are resident for either tax or social security. You can sometimes arrange your affairs so that they work to your advantage.

Under the circumstances you describe you would no doubt be deemed resident in France for social security purposes so if you continued to pay NI and be treated on the NHS you would almost certainly be acting incorrectly.

It's a very complicated subject, and all too easy to go off at tangents that are irrelevant for the majority of people. I am no expert, and have learned my lesson so will not in future try and give what I hope may be helpful suggestions to people who don't fit the standard profiles.

[allanb]

[quote user="AnOther"]It's useful to see those items listed allanb but I think it's potentially misleading to infer that things are as clear cut as they would suggest.[/quote]I didn't say that the rules are "clear-cut".  I don't think they are.  What I did say is that French tax residence depends on those rules - whether they are clear or not - and does not depend on filing a tax return, as Will suggested.[quote]Once again though I point out that the article says that nowhere do the French residency rules specifically mention 183 days or any other period. [/quote]I agree, and I apologize for implying that they do.  However, plenty of legal sources say that you will be regarded as having your séjour principal in France if you spend more than 183 days there in a year, or if you spend longer in France than in any other single country.

With respect to Kentingtons: I think they confuse the issue by failing to make one thing clear.  In the first place, whether you are resident in France depends solely on French rules, and whether you are resident in the UK depends solely on UK rules.  If it turns out that you are resident in both, then - and only then -  do the treaty rules come into play as a "tie-breaker".  Kentingtons mix up the national rules and the treaty rules in a way that seems to me unhelpful.

[lacote0_0]

It appears to me that one instance of a conflict between the two nations' definitions of residency would be a stay of more than 183 days in France, and of more than 91 days (averaged over 5 years) in the UK. In this case you would be resident in both the UK and France under their domestic law, and would have grounds to ask the authorities to apply the treaty tie breakers.

[Will]

It may be worth linking to this, which gives a slightly different slant on things compared with the Kenningtons summary.

I would also read both of these documents in conjunction with UK official booklet HMRC6, particularly where the question of domicile rather than residence is concerned. Both Kenningtons and the French system believe your domicile to be where your permanent home is, but UK tax law is somewhat more complex than that. Although under international tax conventions you can have several residences, you can in law only have one domicile, and when you come under more than one country's tax system then you will find that your domicile of origin takes precedence. This will be irrelevant if you have no UK ties, but if you still have income arising in UK, a home in UK, or even close family in UK it can be very important.

[AnOther]

[quote user="lacote0_0"]It appears to me that one instance of a conflict between the two nations' definitions of residency would be a stay of more than 183 days in France, and of more than 91 days (averaged over 5 years) in the UK. In this case you would be resident in both the UK and France under their domestic law, and would have grounds to ask the authorities to apply the treaty tie breakers.

[/quote]The 90 or 91 day average is relevant to UK residents working abroad and in receipt of a nil tax code and absolutely nothing to do with retirees, early or otherwise, in France.

Interesting article Will which only serves to emphasise that it can be a minefield. I still maintain however that the mere fact of spending 183 days in France does not of itself make you resident and if the OP did happen to be challenged by the French, and quite how in the circumstances that might come about I don't know, he would fail the test on all the other criteria.

You do sometimes have to wonder exactly what some 40 odd years of a supposedly united Europe has actually achieved for the individual [:'(]

[allanb]

[quote user="AnOther"]I still maintain however that the mere fact of spending 183 days in France does not of itself make you resident and if the OP did happen to be challenged by the French, and quite how in the circumstances that might come about I don't know, he would fail the test on all the other criteria.[/quote]Why do you maintain that?  The French tax code is clear about one thing: if you meet any one of the criteria, you are fiscally resident in France. (You may of course be resident in the UK as well: I hope that is understood by now.)

[AnOther]

So what is your response to Cat's post where she wrote ?

[quote user="Cat"]The only mention of 183 days in both documents is to determine where tax on income from employment is to be paid, and has nothing to do with establishing fiscal residency.[/quote]

[allanb]

[quote user="AnOther"]So what is your response to Cat's post where she wrote ?

[quote user="Cat"]The only mention of 183 days in both documents is to determine where tax on income from employment is to be paid, and has nothing to do with establishing fiscal residency.[/quote][/quote]I agree that the 183-day period isn't mentioned in the tax code article on residence, but - as I already said - it seems to be part of the definition of séjour principal, so it is relevant to the residence question.  What Cat says about employment income may be correct, but if she says it has nothing to do with fiscal residence then I'm sorry but I think she's wrong. 

If you don't agree, what do you think the definition of séjour principal is?