TO PAY OR NOT TO PAY?

[Ziggy Stardust]

I am currently selling my house here in France.  Whilst it is my principal residance, and I can prove this having paid my taxe de habitation I understand that I would not pay tax on any profit I have made since owning the house.

My question is though, in order to avoid paying tax do I need to be registered as resident in France?

If the answer is yes, any pointers on doing this would be greatly appreciated. [:)]

Many thanks in advance.

Louise.

[chris pp]

"and I can prove this having paid my taxe de habitation", that, I'm sorry to inform you, is not the same as principle residence, people with holiday homes pay taxe de habitation.

Declaring yourself for tax would be a good start, filling in a French Tax Return.

Chris

 

[Ziggy Stardust]

"and I can prove this having paid my taxe de habitation", that, I'm sorry to inform you, is not the same as principle residence, people with holiday homes pay taxe de habitation.

The reason I say this is because I recently sold a second house that I had never inhabited and the Notaire simply asked if I had paid any taxe de habitation so that I could avoid paying tax.  As I had not paid this, and as I had barely made any profit, I accepted that I had to pay a small amount of tax.

Maybe the Notaire was assuming I was officially resident and I would have to provide some kind of residency permit when it comes to selling this time around?

Thanks

Lou.

[Ron Avery]

As Chris says paying taxe d'habitation is no proof of residence  and I doubt that is why the Notaire asked if you had paid tax d'hab, he probably wanted to know to factor the cost to the vendor

To avoid paying capital gains tax you now must be tax resident in France.  So that will not be hard to prove will it as you have just completed a tax return for 2006 haven't you?.  So take a copy of that to the Notaire as it will have your address on it and that will prove your tax residence.  If you have not completed a tax return you should/will be charged CGT.

[Sunday Driver]

If they are not already paying tax (eg, first time declarers), then a tax return won't have their address preprinted on it, so a copy of the return is not proof of residency - it's just a copy of a form they've filled in.

If they've lived here long enough to receive their first tax advice, then this is clearly prima face evidence of residency.  However, if they haven't, then they need to provide other evidence.  Registration for CMU healthcare, CAF affilliation etc, all fulfil the same criteria.

In order to make sure she's getting accurate advice, perhaps Louise could confirm how long they have been occupying the house as their principal residence and whether they are, in fact, paying tax in France?

Note: current tax residency is not obligatory for exemption from CGT.  French and EU citizens now resident abroad may sell a French property in which they are no longer resident free of CGT providing they were tax resident in France for the preceding two years.

 

 

[Ziggy Stardust]

Hello again,

Thanks for all this!  Firstly, when I sold the other house, the Notaire definately asked about the tax d'hab in relation to paying tax, we were discussing paying as little tax as possible (as I'm sure we all would[Www]) and he asked if I had paid any tax d'hab.

Secondly, I have lived in this house since April 2005.  I don't pay tax in France as I do not earn any money (living off savings currently).  I have never been sent a Tax Advice, but I did once receive a form asking me if I was earning money in France, which I returned telling them I wasn't and have not heard anything since.

Look forward to any further comments!

Lou.

 

[Sunday Driver]

Lou

The sale of the first house was subject to CGT because it was not your principal residence.  The fact that you may have paid tax d'habitation would not have altered that situation.

The sale of your present property will also be subject to CGT if you are unable to prove that it is your principal residence.

In terms of tax, if you took up permanent residence in April 2005, then you have been tax resident here since that date and you should have been submitting tax returns.  If you have been living off savings, then the interest from those savings is unearned income which should have been declared.  You are unlikely to have actually paid any income tax, but your savings do attract social charges which must be paid.  As well as proving exemption from CGT, having a tax reference also opens the door to a number of benefits, such as reduced or even free healthcare costs.......I assume you've registered for healthcare?  (yes, it's compulsory as well)

As you appear to be living "outside" the system, then I suspect you may have problems avoiding CGT.  You need to speak with your notaire.

 

[Panda]

Hi

I agree with Ron and Sunday Driver and not only because they are always right about such things but because I have just been through all this myself. 

When I sold my principal residence I was asked to give a copy of my income tax statement of liability (Avis D'impot) to prove my residency, I was never asked for my tax d'habitation, I'm wondering if the OP misunderstood that request. 

I have paid tax d'habitation on my secondary residence but still had a CGT liability,  the notaire did make it a very small liability but I paid none the less regardless of my tax situation, as one would expect, as it was not my principal residence. 

I think you will struggle to prove it is your primary residency if you've never paid income tax, as has been said you have income from savings and this should have been declared. 

However, assuming you have not already sold and as the market is so slow and houses are often taking more than a year to sell, why not get straight down to the tax office and declare for 2006, you will then have the required document in a few months time.

Panda

[Ziggy Stardust]

Just a quick note to say thanks to everyone who contributed to this question, all comments greatly appreciated.

It would appear I need professional help (in more ways than one!).  [:D]

Louise.

[suein56]

[quote user="Panda "]

However, assuming you have not already sold and as the market is so slow and houses are often taking more than a year to sell, why not get straight down to the tax office and declare for 2006, you will then have the required document in a few months time.

[/quote]

Hi ZG

You might need professional help or at least the notaire's help, but as Panda says - for the tax form it is easy; all you need to do is download the form(s) you need from the internet, fill them in then deliver them to your local tax office. Ask to see someone, explain you didn't realise you had to fill in a tax form 'cos you don't earn anything in France and they should be keen, or at least willing, to help you - depends on your local office.

If you need any help with which forms you need and help with filling them in, then ask on here or do a search - top right of the page.

Sue

 

[Ziggy Stardust]

Many thanks for the info Sue!

Lou.

[Wendy]

Oh boy. I have friends, a couple, who have lived here for five years. They own a house and also rent out a shop, a gite and a flat here. They have a child who attends school here as well. They have never registered here as residents as they do not want to pay French tax or social charges. They have never filed a tax return here.  They pay cash for all their medicines from the chemist and for their doctor visits because they have not registered with CPAM. They are now selling up, house, shop, gite and flat,  to go back to the UK and seem to think they wont have any tax to pay here at all. They seem to think they will just collect a cheque from the notaire and take it back to the UK. I think they are seriously misguided. Are they in for one hell of a tax bill when they sell?. Im worried for them as I know their reasons for moving back.

[Sunday Driver]

Isn't it amazing when tax criminals try to justify their actions by saying they don't want to pay income tax or social charges..... [8-)]

As you say, they will get quite a surprise when their notaire presents them for a hefty bill for capital gains tax.  Clearly they are unaware that the notaire is also a state appointed official -  no doubt he will be obliged to report the tax irregularities to the French impots, so your friends may get an even nastier surprise when they are arrested and charged with fraud and tax evasion..... 

 

[ChezShells]

Sorry, not read all posts but when we sold our first house here we was asked by the notaire if it was our only residence, yes, ok you will not pay tax, that was it, not have you filled a tax form in, it might be down to the notaires or other behind the scenes paperwork but thats our experience, she's a cracking notaire as well, delt with all our comings and goings in the northern Deux Sevres (prob cos she's from the north eh!), no fannying about, if anyone wants more info, email me

That said, i know of someone who had 2 properties here, one was rented out, just sold it, didn't pay tax, I don't know why, you don't like to ask do you.

So in other words, ask your notaire first!

Personally, I don't see a problem paying taxes on profit.

[Ron Avery]

The rules have changed in recent years,  certainly after 2005 and the Notaire should now ask a vendor to prove tax residency in France when deciding about CGT.  Its not just how many houses you may or may not own.  The simple theory is if you are not tax resident in France then you must live somewhere else so you are liable to CGT on any French house sale.

[Georgina]

In France, ignorance apparently is not a defence.  You have to search out the information.  You have to ask for a tax form.  You have to ask how much to pay, nobody tells you, nobody searches you out to tell you, until you try to sell up perhaps. Then you have all sorts to prove. I always wondered how these poor little old ladies cope with all these forms to fill in.  I do feel sorry for them.

[Danny]

What little old ladies?! And why can they cope less than little old men?!

But surely the system in France isn't that different to anywhere else - in the UK one is not always advised how much is due, when to pay it, and which forms to fill in. I know there is PAYE but surely that wouldn't affect 'little old ladies', whoever they are. Tax forms are beyond me even in English, but the tax offices here have staff on hand to answer questions and go through the forms if required, so it needn't be that daunting, whatever your age, size or gender!

Jane

[Wendy]

Do they have staff on hand, in your area, that can speak english?  our local tax office does not. Not that we need this service. But not everyone that comes here can speak fluent french, and many 'old ladies' come here after the death of a husband to be near their son or daughter and grandchildren. And the tax system here is not the same as in the UK. I doubt you have ever filed a tax form here by the way you speak. 'Someone to answer questions and go through forms if required'...are you kidding?.

[suein56]

[quote user="wen"] 'Someone to answer questions and go through forms if required'...are you kidding?.[/quote]

Perhaps we are fortunate but this exists in our area - albeit in French - as a tax advisor is available the first Thursday morning of every month in our small local town. She is 'en permanance' on a rota from the central tax office and visits all the small towns in turn throughout each month.

Sue

[Sunday Driver]

For most people, the tax system in France is fairly simple - the French don't have trouble with their forms and even little old ladies manage it.  Their tax form now arrives each year in the post with their pension amount already filled in, so all they do is sign the form and send it back.  No-one has to ask how much they have to pay because this is worked out by the tax office and if there is a tax liability, then they'll receive a tax bill.

The difference for British people arriving here is that they must make their own first declaration - after that, they'll receive the forms automatically like everyone else.  Whilst their incomes won't be pre-completed, most people's tax affairs are simple enough to require just a couple of boxes to be filled in on the form. 

Anyone who is a member of this forum should have no difficulty obtaining appropriate advice and the tax offices make staff available to offer assistance during the period when declarations are due.  An inability to speak French is clearly an obstacle, but as it applies to all aspects of French life, it should not be insurmountable.  Any old ladies coming over to live with their children should be able to ask them for help in this respect. 

 

[Gyn_Paul]

[quote user="wen"]Do they have staff on hand, in your area, that

can speak english?  our local tax office does not. Not that we

need this service. But not everyone that comes here can speak fluent

french, and many 'old ladies' come here after the death of a husband to

be near their son or daughter and grandchildren. And the tax system

here is not the same as in the UK. I doubt you have ever filed a tax

form here by the way you speak. 'Someone to answer questions and go

through forms if required'...are you kidding?.[/quote]

I'm sad to learn of your experiences with the french tax system. We

live in Creuse (23) acknowleged to be one of the poorer,

thinly-populated departements, yet we have a friendly tax office, with

at least one excellent chap who speaks English (at least he does

on-to-one: when he goes out to any sort of 'road show' it's a different

matter!), so there is no excuse for not getting one's tax affairs in

order. On my several visits there I did get the feeling that they were

generally more disposed to sorting things out, rather than castigating

those who'd got themselves in a mess.

Obviously, this is personal experience of just one departement, maybe your tax office has a different approach.

p

[Wendy]

Well, our view of this system has been soured by a certain accountancy firm in Clermont L'Herault who, until two and a half years ago, had an French english-speaking accountant also well versed in British accountancy practices. To us, with a large business here and all, it was a major find even though it is a 2 hour drive from where we live. Until she went on permanent maternity leave 3 months after signing us on as her clients and then leaving our affairs to be looked after by her other colleagues who spoke no english whatsoever and did not know what to do with our paperwork. It turned she had not made a start on our work either. This lady came very highly recommended to us too by English business clients in Beziers etc. To date, they still have not done our tax return for 2005/6 and have only just finished the paperwork for 2004. We`are receiving penalty notices from the tax dept here left right and centre and informing them that it is our accountants fault falls on deaf ears. As a business we are required to be registered with an accountancy firm...yet when they slip up we still get the fallout!. As we signed a contact with her firm we cannot change accountancy firms until next year. And even that has its difficulties.

And no; she never looked pregnant, let alone mention that she was even resigning during our first consultation with her. And we made it darn clear to her that we had only gone to her personally because of her broad experience. The people whose hands she left our affairs in are a bunch of incompetents; as stated by one of the accountants there to us recently...'This place has been in big trouble since Sarah left'. Well thanks  for nothing Sarah!. Sign clients up and then bugger off!!

So, because of this, we have had to pay out more tax than we should have, tax penalties because our returns are not done, more social contributions than we should have and I have received no re-entree payments for my son at all in 3 years!.

Oh, I should mention they are now getting around to our paperwork...but only because we have refused to pay all the bills they have sent us (they have done no work at all) and we are subtracting all the tax penalty payments we have received from their bills...meaning that they owe US money.

[Danny]

Good Evening Wen,

Yes, if you have a biggish business then you are better off going via an accountant rather than struggling with tax forms yourself. My last post was with reference to the original post, an individual unsure of the tax system. Unfortunately, you appear to have chosen a company that hasn't performed well for you. Just a thought - when you signed your contract with them, did it specify that the accountant allotted to you would be an english speaker? If so, you may have some recourse with them - if not, then unfortunately signing a contract with them was a bad call. Did you sign a three-year contract with them? That seems odd - we just chose a local accountant, used her for a year and now my husband does his business accounts himself (he does, admittedly, have a very very small business!) - there was no mention of a contract.

Do try not to take things so personally - it is neither here nor there if you accountant was pregnant or not (maybe she lost a baby, had a breakdown, ran away with the circus...how are we to know) - the fact is you are not receiving the service you are paying for. Write to them and tell them this, and if you receive no repsonse then cut your losses and go with another firm, if it works out cheaper than paying the late tax penalties.

Good luck with it all,

Jane

[Sunday Driver]

Wen - I'm a little puzzled as to why, as a restaurant owner in France, you should need an accountancy firm that is well versed in British accountancy practice.....

I would expect your business accounts to be reasonably straightforward, so provided you have supplied them with the necessary information, I don't understand why they have not been able to complete your tax returns in an efficient and timely manner.

As Jane says, if they have failed to perform as expected then change them.  Plenty of other accountants looking after similar businesses.

 

[Will]

One might well have financial affairs in both countries, even with a business in France (I've been there myself). In that case an accountant with understanding of both systems is, to say the least, useful. Not that you have any choice in where to pay tax, that is determined by the agreements between France and Britain. But for little things like reclaiming VAT paid in Britain against French TVA and the like.

I do so agree with the comment that you will be better off using an accountant if you have any sort of business, rather than you trying to sort things out yourself, even with a helpful tax office behind you. A good accountant will save you much more than his fees. I also agree that there are some pretty useless accountants, in both countries.