Taxation and social charges on savings interest?

[Daft Doctor]

Hi, I'm trying to prepare myself financially (i.e. put money aside) for my first tax declaration in France as a French resident, which will be for 2012.  As part of income to be taxed, there will be savings interest, some earned on bank accounts in the UK (including ISA's) and some on interest bearing accounts in France (some tax-free some not).  I am assuming that all interest received on French accounts, irrespective of whether the interst is liable to tax or not, is paid over gross, and that UK earned interest should also be declared gross, even though tax in the UK may have been taken off at source (to be claimed back later hopefully).  I have however a few questions which I hope someone might be willing to help me with:

Firstly, is the untaxed interest earned on my UK ISAs taxable in France (I presume it will be).  Secondly, what social charges will apply to my savings interest, wherever it is earned?  Any insight or other related advice would be most useful. [:)]   

[Pommier]

Don't worry about your French bank accounts because early in the New Year you'll receive statements from the bank telling you exactly what amount to put in which box on the tax return. I believe that yes, you declare the gross UK savings income and you declare ISA income as it's not tax free in France.

[Laurier]

Hi

I understood that you could only keep the ISAs if you were still a UK resident and, once you left and became a resident elsewhere, the accounts had to be closed and converted to another kind of account on which you could ask for and receive the interest gross which you would then declare in France.  I wonder now if that is right?

Laurier

 

 

[Daft Doctor]

Hi Laurier, I'm really not sure, but it seems more to do with the policy of individual institutions rather than the type of account..  Obviously I was a UK resident when the ISAs were opened (with Nationwide) and I informed them of our change of residency as soon as we got into France.  They simply applied the change of address to all our accounts, including the ISAs, without question.  On the other hand, we had accounts with Post Office Savings and West Brom building society which were closed as soon as they discovered we were no longer UK residents.  As an aside, there is also a significant variation in the level of evidence required by the banking institutions to prove your French residency, from a simple phone call to having to send certified copies of both passport and official letter or utility bill.

It seems on closer inspection that our French accounts which are not exonerated from tax and social charges have those elements deducted at source from the interest before payment, is that right?  Is it also true that approx 50% of previous years CSG is tax deductible in the following year?  As always, guidance through the maze is much appreciated. [:)]     

[NormanH]

I have not had enough savings for this to be something I am familiar with but you can find some detail of % etc on the lower half of this page

[Daft Doctor]

It's very unusual for me to be flush with with savings either, I usually spend more or less what comes in, its just that we sold our house, sold some business assets and I got my pension lump sum all in a short space of time.  It does add up to a fair bit, but it's all earmarked for providing a home (land + building) here if France.  It is earning a bit of interest in the UK meanwhile however, and it looks as though I should allow for 15.5% in social charges on all that income.  Of that 8.2% will be CSG and I think about half of that will be tax deductible in 2013.  Does the 10% deduction (such as one deducts from earned income and pensions) also apply to savings interest before it is taxed? [:)]

[Pommier]

It seems to me that French banks prefer to deduct social charges at source and tick the box for that on your original application form. Again, the statement from the bank will tell you which box to complete on the tax return.

For some people (and I can't remember if it's people who pay no tax or those who pays lots) it's better to have the interest paid without deduction of social charges, and instead just pay the bill.

Your second tax return will be pre-filled with the amount of CSG paid in the previous year. 

[suein56]

[quote user="Laurier"]I understood that you could only keep the ISAs if you were still a UK resident and, once you left and became a resident elsewhere, the accounts had to be closed and converted to another kind of account on which you could ask for and receive the interest gross which you would then declare in France.  I wonder now if that is right? [/quote]

Unfortunately many ex UK residents believed this to  be true ... and so cashed in or otherwise converted their ISA investments. Whereas the truth is you can keep them and they remain tax free in the UK but, and there is a big BUT, the income is taxable in France and must be declared on your déclaration in France as this income forms part of your global income.

It is sensible, perhaps, to keep these investments, especially if they are doing well, as there might come a day when a return to the UK is necessary and past ISAs cannot be recouped ... as once sold/transferred the tax-free aspect is lost forever.

The truth is that as a non-resident of the UK you can no longer add to, or invest in any new ISA investments, not that you have to close them.

Sue

[Laurier]

Hi Sue

That is a huge surprise to me. I was definitely under the impression from several institutions that you could not keep them in that same account. The paying tax in France didn't seem to be the issue, just that you could not keep them in the same account. If DD was told he had to close accounts at certain institutions, it seems as if it does depend on the institution concerned.

 

Thanks

Laurier

[suein56]

[quote user="Laurier"]That is a huge surprise to me. I was definitely under the impression from several institutions that you could not keep them in that same account. The paying tax in France didn't seem to be the issue, just that you could not keep them in the same account. If DD was told he had to close accounts at certain institutions, it seems as if it does depend on the institution concerned.[/quote]

Perhaps this concerned those cash Isas which were on a continuous rolling basis ie each year a new one was opened in your name. As this would no longer be possible for a non-resident then the original contract would be considered broken ?

Perhaps it was also down to the individual institution's interpretation of the rules.

Sue