ring fenced pensions

[idun]

Someone posted in the recent past about their french tax problems due to their government pension from the UK not being dealt with properly and getting a bill they were not expecting.

So I have a question, is a government pension completely ring fenced?

One has to declare it and any UK tax paid whether it be O or actual tax paid,  and then the french cannot touch it at all.

IF for say, no UK tax had been paid due to the tax free allowance, can the french just say that they are going to tax it.

It may seem obvious to those with such pensions, but I did wonder.

[anotherbanana]

I await the answers with bated breath too.

[Weegie]

The situation changed some years ago.  Previously you declared the gross amount of

relevant  pension and the amount of UK

tax paid.  A credit was then given for

the amount of tax paid at the UK level.

 

Now you have to declare the gross amount of pension and a

credit is given for the amount of French tax which would have been paid on the

gross.

 

This makes a difference when the level of taxation in France

differs from that in the UK so the credit may not (usually doesn't!) tally with

what was paid.

 

The global income has to be declared to establish the

correct level of French tax to be paid on any income other than the UK pension.

 

I trust that helps.                                        

[idun]

So say someone has a govt pension income  from the UK of 20000€. They will have paid about 1100€ tax on that in the UK, so both these sums gets declared.

AND then the french still use that 20k€ to work out the tax on all other incomes, say about 8500€ for a state pension and maybe some other pensions taking that lot up to 30k€.

So for an income of 30K€ for a single person would be just over 2k€ impots in France, so there would be another 1000€ or there abouts to pay.

Have I got this?

So someone is a teacher for 8 or whatever years and has 10k€ in pension. State pension is 9k€ and a private pension of 20700€.

What then.

That is what I don't understand about the double taxation agreement.

On the total of 39700€ with no deduction of UK tax, the impots would be for a single person around 4700€.

And if that 10k€ didn't count it would be around 2k€ in impots in France.

I am, needless to say, very confused about this.

[EuroTr@sh]

As I understand it, but I may be wrong.

You declare your total worldwide income in France.

France works out your tax liability on each source of income and adds them together. Say this comes to 2 000 in total.

Then, for any sources of income which are not taxable in France, it deducts the appropriate amount from your tax bill. If none of your income is taxable in France it will therefore deduct 2k from 2k and the bill will be 0. If half is taxable in the UK and half in France, it will deduct 1K;

It makes no difference how much or how little tax you actually paid in the UK. Well it does to you, but it makes no difference to the calculation because it's not taken into account,I'm not sure France even needs to know.

But the trick is, you never get anything back. If you paid more tax in the UK than you would have paid in France, that's your loss. If you paid less tax in the UK than you would have paid in France, then the deduction France makes from your tax bill is less than the atual amount paid so it's still your loss. In effect, you always end up paying the higher of the two amounts.

They're not daft, these tax people.

[Weegie]

The UK tax doesn't get declared.  It is irrelevant as far as the French are concerned.  You are given a credit against the tax on your total global income, at the rate you would have paid tax in France.

The level at which you pay tax is the level that corresponds to your global income.

For example if you had a UK State pension it would be taxed in France but, if that was all you declared, you would only pay tax at the level that corresponds to it.  

That would normally mean, with the amount of UK State pension, that you wouldn't pay any tax on it but that would be inequitable as your total income, in the example you gave, would demand a higher level of taxation.  Think of the various tax bands that apply.

As an aside, if you are in receipt of a UK State pension, be clear when you are dealing with the French tax authorities, that it is equivalent to a French pension from one of the Caisses as the mention of the word "State" immediately makes them think that  you were a fonctionnaire and that it is effectively a private pernsion.  Just for the sake of clarity.

Some years ago I was subject to a dip check by my local tax office.  I went to see them and, as a result of that, I did a paper for them explaining the set up in UK regarding State pensions and private pensions.

[idun]

OK I think I have got it now.

The only thing I know is that HMRC when we moved back wanted to know exactly how much tax we had paid in France and duly deducted that amount from our bill.

Nothing to do with the government, just a french salary that went through the usual process in such cases and was sent on to the UK.

[pomme]

You declare your government pension income in the UK. In calculating the any tax due they also add other UK income such as the state pension. You have the UK tax allowance (currently £12500 ) before you pay UK tax on that total.

In France, in most circumstances, you are taxed as a household. You declare your total household income including state and other pensions (form 2042 lines 1AM+1BM) and gross UK government pensions (1AL+1BL).

A simplified working of the calculation of the avis d'impôt:

There is a 10% special abattement (discount) on all the pension income (1AL+1AM + 1BL+1BM)

They add up all your income from the various sources to give your "Revenu brut imposable", and deduct any CSG from the previous year to give "Revenu imposable" = J.

Then according to the the tax tables and the number of parts in the household they calculate the tax ("Impôt sur les revenus soumis au barème") = K.

They then calculate the government pension "Crédit d'impôt sur rev. étrangers" by giving a credit for the fraction of the government pension less the 10% abattement compared to your total taxable income; calculated by K x (90% of 1AM+1BM) / J.

There may then be some other adjustments which depend on the income level (I think due to various tax decisions mainly as a result of anomalies when just above/below tax bands, etc.).

The final figure after all the reductions is the "Impôt sur le revenu net".

[idun]

thanks Pomme.

It was just that UK government bit that I  wondered about and how they calculated using it.

The rest, well, the net and brut etc, I did know about, it was always so, in fact I think that there used to be another abattement of 20% too, but maybe not now.

We used to get a 10% abattement on french income in the UK, but that stopped about three years ago. Nice whilst it lasted.[:)]

Do you still have to have household income declared in France. I thought that I had read that since the prelevement a la source that there was a choice, foyer ou individuel, maybe I didn't pay enough attention to that?

[pomme]

Some of the abatements seem quite complex and it took me some time to discover where to find the necessary data and how those relevant to us are calculated.

For a long time it has been the case you can be taxed separately (although I don't think I knew you could!). But for most it is advantageous to be jointly taxed, especially if one would be taxed in a higher tax band which might not be the case with incomes added. If taxed separately it is not possible to share unused allowances. Adding children to a household also affects the decision.

Although a few years old, this web page has a good summary http://impotsurlerevenu.org/impot-et-changement-de-situation/958-la-declaration-commune-est-elle-toujours-avantageuse-.php The INSEE link http://www.insee.fr/fr/ffc/iana/iana9/iana9.pdf mentioned is even older but I think it only the various levels/bands which have changed.

I'm not sure what time of year you can make the declaration of changing tax regime? I do not know if there are any other impacts on being taxed separately? e.g. what happens with renovation/environmental grant calculations?