Avis d'Impot 2013 and UK rent

[idun]

I take it the social charges are the CSG etc. There is nothing comparable in the UK and therefore, this negociation as a get out clause for UK residents living in France was quite a coup for expats, ................. if they can get it to work.

I can certainly understand the fonctionnaires confusion as to whether it should be paid, it must feel counter intuitive to not charge it.

And this 'tax', I'm afraid was essential when it was brought in and we certainly 'felt' it's effect on our income. It still is essential, the french health system needs every last sou it can get.

I was talking to a friend tonight and they were saying more and more things are being taken off the prescribed list, or reimbursements simply reduced. And waiting lists for many things are getting longer and longer.

[Aly]

They have recently announced a plan to increase social charges on Pension contribution payments - perhaps that will help. I am sure they will find more and more imaginative ways to tax people. But the truth is  France has crippling debt and the worst unemployment in modern times.  Taxation alone is not the answer. Even Moscovici and Fabius now acknowledge that levels of taxation are too high and that citizens and busineses have had enough.

http://www.catharcountryinfo.com/index.php/business-a-property/business-finance-a-legal/financial-advice-information/1170-social-charges-on-foreign-income

Economy

Minister Pierre Moscovici admitting that he was well aware that

citizens and businesses “had had enough”. Foreign Minister Laurent

Fabius also warned that there were levels of tax that were too high.

- See more at:

http://www.connexionfrance.com/Income-tax-bills-Moscovici-enough-Fabius-14983-view-article.html#sthash.NZ15BKja.dpuf

Economy

Minister Pierre Moscovici admitting that he was well aware that

citizens and businesses “had had enough”. Foreign Minister Laurent

Fabius also warned that there were levels of tax that were too high.

- See more at:

http://www.connexionfrance.com/Income-tax-bills-Moscovici-enough-Fabius-14983-view-article.html#sthash.NZ15BKja.dpuf

[parsnips]

[quote user="NormanH"]"the more reasonable tax policy of the UK, as opposed to the draconian

impositions of the government of the country in which , I assume , you

freely chose to live"

The free choice to live in France might be considered as  allied to the responsibility to adhere to its social charges, since those who have  chosen to live here benefit from the system they don't pay for.

That free choice should include acceptance of the taxes and charges paid by French people in the same situation.

It is time that the loopholes which allow people to escape those responsibilities were closed

[/quote]

Hi,

      Instead of talking about "loopholes" which implies that some french resident UK citizens are , like certain multi-nationals , using high-powered lawyers to subvert and exploit complex discrepancies  in the law , why don't you all read the relevant sections of the Double Taxation Treaty ,here;

www.ambafrance-uk.org/IMG/pdf_france_uk_2008.pdf

This was negotiated over a long period , by people who ,we must assume, knew what they were doing.  In fact , for the articles in contention currently (1,2,6, and19) , the new treaty basically repeated the principles laid down in the old treaty dating back to the 1960s.

If some of you think that the treaty is "unfair" (to whom?)  then you should take it up with the UK Treasury who negotiated it on your behalf.

[NormanH]

I have read and I believe understood

the treaty in the course of a previous discussion.

I am confident that your interpretation

is correct.

This does not mean that I approve of

its terms.

Some years ago a vociferous group of

early retired British people in France, among whom cooperlola was a

prime mover, campaigned vociferously for the right of residents in

France who had been here for five years to be treated in the same

way as French nationals in terms of entry into the CMU (at that time

often erroneously referred to as “the French health system”

They won that fight.

All I am advocating is that British

full-time residents in France be treated in the same way as French

nationals in terms of tax and Social security contributions.

I did not use the word 'fair' in the

passage you quoted,

[idun]

The strange thing is that the french are quite vicious in the way they tax non residents with french income, as a lot more impot is charged and next to no allowances.

And yet, I'm not sure if they tax rents on french properties with non resident owners in the same fashion. Frankly, I have seen all the non resident stuff over the past few years and cannot make head nor tail of the 'foncieres' bit regarding  letting out property.

Yes, France is in a mess. And the pensions, well they are freezing, but only for 6 months and increasing the CSG etc on pensions, I think as nothing is law as yet. On french news last night they said that pensioners are better off than a lot of working people, and I have to agree with that. I have been waiting for them to hit pensioners one way or another and they are going to.

[Patf]

Norman and Nomoss - I can see your point that to be fair french residents with rent from property in the UK should pay tax on it here in France.

But we already pay tax on ours to HMRC (self assessment forms completed each year) so don't want to pay twice [:'(]

To change to paying in France would involve a huge amount of complicated admin.

One simpler way would be for us to pay tax as usual to HMRC, then they would pass this over to the Impots here. Similar to the health payments for retirees.

[Pickles]

[quote user="idun"]The strange thing is that the french are quite vicious in the way they tax non residents with french income, as a lot more impot is charged and next to no allowances.

And yet, I'm not sure if they tax rents on french properties with non resident owners in the same fashion. Frankly, I have seen all the non resident stuff over the past few years and cannot make head nor tail of the 'foncieres' bit regarding  letting out property.

[/quote]

As non-residents with French rental income we are taxed at a flat 20% on the whole net income after expenses. No "bareme". No personal allowance (if it exists in France). As of last year, we are now also paying CSG, CRDS, "Prel Soc Add Prel Sol" totalling 15.5%, again on the whole net income after expenses.

[dr orloff]

Well actually they are treated exactly the same.  A French national who is resident in France and has rental income from the UK will also be liable to tax in the UK on that income and therefore should not be taxed also in France.  A UK national who is resident in France and has rental income from France is treated in the same way as the French national.

To say that income from the UK should be treated identically to income from France is to simply ignore the different nature of the income.

The treaty says that a full credit against tax and social charges is given against UK rental income irrespective of the amount of UK tax paid.  If this is to be interepreted as a credit is only given if the income is above the UK zero rate tax band, as it has been by many tax offices, then this introduces an inherent gross unfairness that penalises those with less income.  For example, someone who pays £1 of tax in the UK as their income falls just above the personal allowance is liable to zero tax or social charges in France.  However, someone who has less income and pays no tax in the UK - or put another way, just £1 less in tax, can be liable to €2,500 of social charges in France on their income.   No reasonably minded individual could possibly think that a situation like that was either fair or intended.  The treaty by the way explicity recognises the social charges simply as a form of taxation, no different in principle to income tax.

Traditionally the French taxman hasn't been interested in the secondary taxation rights for income that is  taxable in other countries, it is either taxable in one or the other.  It's not a loophole, it is the just way the French system works and is available to all French residents as they could invest abroad.  If they were interested in taxing UK taxable income then the tax treaty would have been negotiated such that UK rental income would be also taxable in France but with a deduction for the amount of UK tax paid.  That would be entirely fair and that is what they do with capital gains on the sale of UK property (that one was a loophole as the UK does not levy capital gains tax on non-residents).  So there really are only two fair options, apply the treaty fairly by not further taxing those with lower UK rental incomes or renegotiate it and tax everyone equally.   But to think the French are acting reasonably by applying social charges as they have been is a difficult position to understand.

[Pickles]

[quote user="Patf"]Norman and Nomoss - I can see your point that to be fair french residents with rent from property in the UK should pay tax on it here in France.

But we already pay tax on ours to HMRC (self assessment forms completed each year) so don't want to pay twice [:'(]

To change to paying in France would involve a huge amount of complicated admin.

One simpler way would be for us to pay tax as usual to HMRC, then they would pass this over to the Impots here. Similar to the health payments for retirees.

[/quote]

We pay the Fisc tax and social charges on our French rental income. We then declare the income and the French tax paid to HMRC, which then calculates the tax payable in the UK, subtracts from this the tax paid in France and then bills us for the excess. For French residents with UK rental income, the Fisc operates differently to HMRC, and in so doing reduces the French tax take. It wouldn't be a huge amount of complicated admin to do it differently - HMRC is already doing this for UK-residents. I do not begrudge the French residents with UK rental income their "lenient" handling in this matter, though I am jealous!

[Pickles]

[quote user="dr orloff"]The treaty by the way explicity recognises the social charges simply as a form of taxation, no different in principle to income tax.[/quote]

Indeed it does, but it appears that HMRC has decided otherwise, and has apparently ruled that CSG/CRDS etc are either NOT taxes or else that the Fisc should NOT be charging them on non-residents, and therefore is apparently not giving credit for CRDS/CSG payments against UK income tax on French rental income. I'm using the word "apparently" because although I've seen a write-up of the decision, I haven't seen the original.

[nomoss]

[quote user="Patf"]Norman and Nomoss - I can see your point that to be fair french residents with rent from property in the UK should pay tax on it here in France.
But we already pay tax on ours to HMRC (self assessment forms completed each year) so don't want to pay twice [:'(]
To change to paying in France would involve a huge amount of complicated admin.
One simpler way would be for us to pay tax as usual to HMRC, then they would pass this over to the Impots here. Similar to the health payments for retirees.
[/quote]

My original post on the subject, before the issue was clouded by remarks about what someone thought I said,  was:-

"I'm trying to get my head around the apparent fact that, if, as a French resident, I rent out a property in the UK, I am not liable to french taxes nor CSG on the rent, even if I don't pay any taxes on this income in the UK, but if I own a similar propety in France I would be laible to both.

If true, I think this is grossly unfair, and should be rectified asap."

What I thought, and think, is unfair is that tax relief is given in France for income on which no tax has been paid in the UK.

This a result of a (re-?) interpretation of sub-paragraph (a).(i) of paragraph 3 of Article 24 of the UK/France Double Taxation Convention, which was posted earlier, and which refers to the tax credit to be applied against French tax. It is the part applying to UK rental income. :-

Such tax credit shall be equal:

(i) in the case of income other than that mentioned in sub-paragraph (ii), to the amount of French tax attributable to such income provided that the resident of France is subject to United Kingdom tax in respect of such income;

"Subject to United Kingdom tax" was taken by many, including some French tax authorites, to mean "taxed in the UK", but it has successfully been argued that it means that tax would have been charged if it were not for allowances reducing it, even to zero.

[nomoss]

[quote user="dr orloff"]
................... The treaty says that a full credit against tax and social charges is given against UK rental income irrespective of the amount of UK tax paid.  If this is to be interepreted as a credit is only given if the income is above the UK zero rate tax band, as it has been by many tax offices, then this introduces an inherent gross unfairness that penalises those with less income.  For example, someone who pays £1 of tax in the UK as their income falls just above the personal allowance is liable to zero tax or social charges in France.  However, someone who has less income and pays no tax in the UK - or put another way, just £1 less in tax, can be liable to €2,500 of social charges in France on their income.   No reasonably minded individual could possibly think that a situation like that was either fair or intended.  The treaty by the way explicity recognises the social charges simply as a form of taxation, no different in principle to income tax. ........................

[/quote]

 

I apologise for not quoting your post in full.

€2,500 social charges at 15.5% in France represents an income of €16,129 - about £13,800. I, and I imagine, others, would be delighted to get such an amount entirely tax free. 

Can UK non residents get so much tax free allowance? Surely it will depend on their world wide income?

 

 

[idun]

 The Social Charges in France are not income tax. They were brought in to help pay for the social security/health care debt in a way that these several charges would be levied on more people in a general manner.

So income tax no, a replacement for part of what would be called National Insurance in the UK. And that is an internal matter isn't it, even in this federal europe.

[NormanH]

A French national who is resident in France and has rental income from

the UK will also be liable to tax in the UK on that income and therefore

should not be taxed also in France.  A UK national who is resident in

France and has rental income from France is treated in the same way as

the French national.

But a retired Uk national would not pay Social charges in France nor NI in the UK, whereas a retired French national would pay these charges for a service both of them can use...

[dr orloff]

[quote user="Pickles"][quote user="Patf"]Norman and Nomoss - I can see your point that to be fair french residents with rent from property in the UK should pay tax on it here in France.

But we already pay tax on ours to HMRC (self assessment forms completed each year) so don't want to pay twice [:'(]

To change to paying in France would involve a huge amount of complicated admin.

One simpler way would be for us to pay tax as usual to HMRC, then they would pass this over to the Impots here. Similar to the health payments for retirees.

[/quote]

We pay the Fisc tax and social charges on our French rental income. We then declare the income and the French tax paid to HMRC, which then calculates the tax payable in the UK, subtracts from this the tax paid in France and then bills us for the excess. For French residents with UK rental income, the Fisc operates differently to HMRC, and in so doing reduces the French tax take. It wouldn't be a huge amount of complicated admin to do it differently - HMRC is already doing this for UK-residents. I do not begrudge the French residents with UK rental income their "lenient" handling in this matter, though I am jealous!

[/quote]

To do it differently is not simply a question of admin, it would be a question of renegotiating the tax treaty.  The 100% credit against foreign taxable income is the way the French tax system has operated and continues to operate, the way they want it to operate and the method that they prescribe in the tax treaty.  So they can't just ignore all that and do it a different way.  They would most likely have to renegotiate all the other tax treaties too.  It would actually be an enormous change to the entire system.

[dr orloff]

[quote user="Pickles"][quote user="dr orloff"]The treaty by the way explicity recognises the social charges simply as a form of taxation, no different in principle to income tax.[/quote]

Indeed it does, but it appears that HMRC has decided otherwise, and has apparently ruled that CSG/CRDS etc are either NOT taxes or else that the Fisc should NOT be charging them on non-residents, and therefore is apparently not giving credit for CRDS/CSG payments against UK income tax on French rental income. I'm using the word "apparently" because although I've seen a write-up of the decision, I haven't seen the original.

[/quote]

They might think otherwise but that is clear in the tax treaty too, which specifically excludes the CSG as a deduction against UK taxes where the UK has secondary taxation rights.

[dr orloff]

[quote user="nomoss"]

[quote user="dr orloff"]

................... The treaty says that a full credit against tax and social charges is given against UK rental income irrespective of the amount of UK tax paid.  If this is to be interepreted as a credit is only given if the income is above the UK zero rate tax band, as it has been by many tax offices, then this introduces an inherent gross unfairness that penalises those with less income.  For example, someone who pays £1 of tax in the UK as their income falls just above the personal allowance is liable to zero tax or social charges in France.  However, someone who has less income and pays no tax in the UK - or put another way, just £1 less in tax, can be liable to €2,500 of social charges in France on their income.   No reasonably minded individual could possibly think that a situation like that was either fair or intended.  The treaty by the way explicity recognises the social charges simply as a form of taxation, no different in principle to income tax. ........................

[/quote]

 

I apologise for not quoting your post in full.

€2,500 social charges at 15.5% in France represents an income of €16,129 - about £13,800. I, and I imagine, others, would be delighted to get such an amount entirely tax free. 

Can UK non residents get so much tax free allowance? Surely it will depend on their world wide income?

 

 

[/quote]

No problem.  I worded it badly.  For those figures I meant a family income. 

For an individual then it would be half, c€1250 in social charges.  But the illustration that

those on lower incomes can end up paying huge amounts more in taxes is valid and

there are plenty of  instances where that has actually happened.  And it

means that the only fair way to apply the credit is to credit in full

regardless of whether income is above or below the UK tax threshhold.  Otherwise how could anyone think it fair for the less well off to pay tax when the better off pay nothing?

[dr orloff]

[quote user="NormanH"]A French national who is resident in France and has rental income from

the UK will also be liable to tax in the UK on that income and therefore

should not be taxed also in France.  A UK national who is resident in

France and has rental income from France is treated in the same way as

the French national.

But a retired Uk national would not pay Social charges in France nor NI in the UK, whereas a retired French national would pay these charges for a service both of them can use...

[/quote]

A retired French national would not pay any social charges on rental income from a UK property.  They are treated the same.  But to compare UK rental income to French rental income is to compare apples and pairs.  Furthermore the retired UK national may well be covered by an S1 and a  payment from the UK to the French governments for the service they use, so it's not something for nothing.

[nomoss]

[quote user="dr orloff"][quote user="nomoss"]

[quote user="dr orloff"]
................... The treaty says that a full credit against tax and social charges is given against UK rental income irrespective of the amount of UK tax paid.  If this is to be interepreted as a credit is only given if the income is above the UK zero rate tax band, as it has been by many tax offices, then this introduces an inherent gross unfairness that penalises those with less income.  For example, someone who pays £1 of tax in the UK as their income falls just above the personal allowance is liable to zero tax or social charges in France.  However, someone who has less income and pays no tax in the UK - or put another way, just £1 less in tax, can be liable to €2,500 of social charges in France on their income.   No reasonably minded individual could possibly think that a situation like that was either fair or intended.  The treaty by the way explicity recognises the social charges simply as a form of taxation, no different in principle to income tax. ........................

[/quote]

 

I apologise for not quoting your post in full.

€2,500 social charges at 15.5% in France represents an income of €16,129 - about £13,800. I, and I imagine, others, would be delighted to get such an amount entirely tax free. 

Can UK non residents get so much tax free allowance? Surely it will depend on their world wide income?

 

 

[/quote]

No problem.  I worded it badly.  For those figures I meant a family income.  For an individual then it would be half, c€1250 in social charges.  But the illustration that those on lower incomes can end up paying huge amounts more in taxes is valid and there are plenty of  instances where that has actually happened.  And it means that the only fair way to apply the credit is to credit in full regardless of whether income is above or below the UK tax threshhold.  Otherwise how could anyone think it fair for the less well off to pay tax when the better off pay nothing?

[/quote]

 

Are you saying that a UK family could be living in France with no other income than, say, £13,800 rent from property in the UK?

Or that their UK tax threshold is applied only to income arising in the UK, ignoring any income arising in France?

[mazandcol]

For anybody who is still interested in the original purpose of this thread....

I e-mailed Villeneuve Wed afternoon asking why they had charge tax and social charges on

our UK rental income - quoting relevant articles from the DTT and

included the e-mail sent to Connexion 31 May (I posted it earlier).

I

had a reply yesterday (less than a day!) saying I was indeed entitled to

a rebate of the relevant amount of tax and all the social charges.  They're sending a

new avis.

[parsnips]

[quote user="mazandcol"]For anybody who is still interested in the original purpose of this thread....

I e-mailed Villeneuve Wed afternoon asking why they had charge tax and social charges on

our UK rental income - quoting relevant articles from the DTT and

included the e-mail sent to Connexion 31 May (I posted it earlier).

I

had a reply yesterday (less than a day!) saying I was indeed entitled to

a rebate of the relevant amount of tax and all the social charges.  They're sending a

new avis.

[/quote]

Hi,

 Well done, and welcome to the ranks of the (alleged) loop-hole- exploiting tax dodgers.

[dr orloff]

Nomoss, I'm saying neither of those, the first is possible of course although there would most likely be some supplementary income.

As a French resident then for UK tax you declare only income that arises in the UK and is taxable in the UK.  You ignore income arising in France and income arising in the UK that is taxable in France. 

I do understand the argument that rental income from the UK should be subject to the same tax in France as rental income from France.  But it really is a bit too simplistic.  If that were the case then rental income from anywhere should be subject to the same tax in France but the French tax system simply isn't set up to operate like that.  You would have to change one of the general principles of taxation in France for it to operate as it does in the UK (which is inherently fairer and more progressive), the computer system and all the tax treaties.  The costs would outweigh the tax generated.  Of course a simpler change would be to say the the CSG are not taxes, but it is the French government who have explicity stated that it is a form of taxation to be treated the same for tax treaty purposes as the other taxes - they deliberately included this definition in the tax treaty, it was not defined in the previous treaty which was drafted before the introduction of CSG.

Any resident of France can invest in property abroad so the French national is not treated unfairly compared to any other national.  You could equally say that it is unfair that some French residents who invest in an assurance vie pay less tax than someone who has an equal amount of money invested in property in France.  UK rentals and French rentals are quite different forms of income for tax purposes and the fairness argument should apply to either income stream.  All French residents with UK rentals should be treated equally, but they are not, the less well off are being penalised and that is the crux of this whole argument.

[nomoss]

mazandcol. apologies for leading your thread astray.

dr orloff. Thanks for your explanation and your patience, especially your understanding of what has actually been said before replying.[:D]

I had no idea that personal allowances for non UK residents are the same as for residents, nor that their income not taxable in the UK is not considered when applying the allowances.

I doubt we shall ever buy a house in UK again, but it's good to know that we can make £21,200 from one, after allowable deductions, without being liable for tax anywhere[:D]

On second thoughts, if mortgage interest is an allowable deduction, I might be tempted.

 

[dr orloff]

Mortgage interest is an allowable deduction against rental income, both for UK and French tax calculations.  If that were your only UK taxable income then it would be not taxed in the UK, or taxed at the zero rate, a subtle semantic difference which is actually behind this whole battle with the French tax authorities.    In France the tax and recredit system means the rates you pay on income taxable in France are higher.  Effectively with UK rental you get the benefit of the UK tax allowance but in France that income eats into the French zero rate band, a kind of swap the net benefit of which depends on the rates prevailing at the time. 

If you want absolute fairness in the French tax system then surely the integration of the income tax and social charges regimes would be the best petition.

[idun]

I disagree Dr Orloff, it should not become a tax as in income tax.

 The CSG etc is paid by an awful lot of people at source, from pensions, salaries and from bank interest. Whereas income tax is a year later and if they changed the system, I reckon that a lot of people would have terrible financial problems.

I would rather that they didn't change it, especially now, as life is hard for so many.