UK expat in Middle East - "fiscally resident" or not?

[Stuarta]

Hello all,

Just came across this wonderful forum while looking for clarification on the above issue.

We are an expat couple (UK/Canadian), living in Dubai and considering buying a second home in France.

We are generally very aware of most tax issues, etc., having lived in France for 6 years before moving out to the middle east, filed tax returns, etc.

The issue regards income tax. One of the main benefits of working in the middle east is the lack of income tax - something has to make up for the atrocious driving! The question is, if we buy a second home in France, which, although mortgaged, is worth more than our investments, etc. elsewhere, will we be considered "fiscally resident" or not? To clarify, we do NOT own property elsewhere, keep our savings offshore and did own a house in France up until 3 years ago. At the time, I worked as a "frontalier" in Switzerland and as such, the taxes were shared by the Swiss and French governments.

As much as we would like to retain links in Frnace, with a view to eventually retiring there, I would most certainly consider being taxed on my income earned in Dubai to be a "deal-breaker".

Many thanks in anticipation.......

[Will]

From what you say the answer is 'probably not', but this guide will give you a pretty good idea. It would seem that as long as your 'habitual abode' is the Middle East then the fact that the only house you actually own is a French holiday home would not be sufficient to make you resident.

[AnOther]

I read it completely to opposite way Will, if the only property owned is in France then the simple fact that you only spend holidays there does not make it a holiday home in residency and tax terms.

From the article:

Conclusion

As you can see, to be in a “vague residency position”, you would need

to have a property in the UK and France, where the utility bills are in

your name and equal vital interests in each, spend exactly the same

amount of time in each country and be a national of both countries. If

you are working you would need to be exercising your profession equally

between the two countries. This is why very few people fall into the

“vague” category. Establishing your position maybe somewhat complex, but

it is normally perfectly clear.

EDIT: Excuse both our manners welcome to the forum !!!

[EuroTrash]

If you go straight to the French govt criteria for fiscal residence it seems pretty clear that the OP would not be fiscally resident here - their three criteria are where your family is based, where most of your working time is spent, and where most of your income is earned. If you fulfill one or more of these criteria you are fiscally resident but I don't see that the OP meets any.

http://www.ufe.org/fiscalite/determiner-sa-residence-fiscale#détermination

[andyh4]

[quote user="Stuarta"]As much as we would like to retain links in Frnace, with a view to eventually retiring there, I would most certainly consider being taxed on my income earned in Dubai to be a "deal-breaker".

Many thanks in anticipation.......


[/quote]

 

Fear not - there is a double taxation treaty between France and Dubai (assuming that is you pleace of work).  Therefore your income in Dubai is considered as having been taxed there and is itself not subject to French income tax.

There may be some other more minor charges depending on whether you are considered as fiscally resident or not in France - and from what you have revealed I would lean towards not.

 

Welcome to the forum

[NormanH]

If the double taxation treaty is like the one with the UK things have recently changed so that you declare your 'foreign' income in France but get an allowance against it equal to the amount you would have paid in French tax.

It doesn't affect the amount of tax you pay in France, but it can affect whether you pay things such as taxe d'habitation.

On the other hand this might have nothing to do with your situation.. I offer it in case you are considered fiscally resident.

[AnOther]

The France/UAE DTT:

http://www.europejazz.net/legal/fr_emir.htm

I still lean to the view that ownership of the French property will determine French residency.

[Pickles]

[quote user="AnOther"]The France/UAE DTT:

http://www.europejazz.net/legal/fr_emir.htm

I still lean to the view that ownership of the French property will determine French residency.[/quote]

To be honest, I would have thought that the OP's situation equated with "work in UK, rent in UK, own in France", which, provided that the OP does not stay in France for more than half the year, would mean that no French income tax would be due and the OP would not be fiscally resident. You don't need to own your primary residence.

The thing that MIGHT however be invoked is article 164 of the Code Generale des Impots (perhaps this is what you are getting at):

[quote]L'article 164 C du CGI prévoit la taxation des propriétaires quand bien même l'habitation ne procurerait aucun revenu.

Les

personnes qui n'ont pas leur domicile fiscal en France mais qui y

disposent d'une ou plusieurs habitations, à quelque titre que ce soit,

directement ou sous le couvert d'un tiers, sont assujetties à l'impôt

sur le revenu sur une base égale à trois fois la valeur locative réelle

de cette ou de ces habitations à moins que les revenus de source

française des intéressés ne soient supérieurs à cette base, auquel cas

le montant de ces revenus sert de base à l'impôt.

Exception

Les

dispositions du premier alinéa ne s'appliquent pas aux contribuables de

nationalité française qui justifient être soumis dans le pays où ils

ont leur domicile fiscal à un impôt personnel sur l'ensemble de leurs

revenus et si cet impôt est au moins égal aux deux tiers de celui qu'ils

auraient à supporter en France sur la même base d'imposition. De même,

elles ne s'appliquent pas, l'année du transfert du domicile fiscal hors

de France et les deux années suivantes, aux contribuables de nationalité

française qui justifient que ce transfert a été motivé par des

impératifs d'ordre professionnel et que leur domicile fiscal était situé

en France de manière continue pendant les quatre années qui précèdent

celle du transfert.[/quote]

which amounts to an income tax based on the rental value of the French property (whether rented or not). EU residents are not subject to this tax.

 

[EuroTrash]

Owning property isn't a major criterion in determining residence, as has been said. It's where you live and work that counts. You work where you work and you live where you live, regardless of whether you rent or own or are in free accommodation provided by your employer.

Property ownership and other considerations only come into it in a tie-breaker situation if someone works equally in 2 countries, spends equal time in 2 countries, and doesn't have immediate family ties firmly rooted in one or the other. Since the OP appears to do all their work, earn all (or most of) their income, and spend most of their time in the Middle East, and has no family ties to France, there's no reason for it to come to a tie-breaker. It seems perfectly clear cut. They live in the Middle East and their holiday home in France is simply a holiday home until such time as their lifestyle changes and they either start working in France or living here for long stretches.

[Stuarta]

Thanks to everyone for their replies - while I am somewhat heartened, I won't be going any further until I get clarification on this issue - lack of tax is about the only thing that makes working out here worthwhile so it's pretty important to us!

To clarify :-

Our only residence is in Dubai.

The whole family lives here, all year round - kids go to school here.

We have no family ties in France.

Both of us work full time (only) in Dubai / Sharjah

We do not own property elsewhere.

We will not be spending more than 2 months per year in France.

I have now found some information about the Dubai - France double taxation treaty but, unless I'm reading it wrongly, this seems to be aimed primarily at corporate income tax, rather than individuals. If it turns out to apply to individuals too, then great but I'll need to get this clarified.

Thanks again everyone,

Stuart.

postscript - have just read the ufe.org link that was provided - it appears that I was mistakenly thinking of "centre de vos intérêts économiques"  as referring to assets, rather than income. In my view, that more or less confirms what several people have said here, that we should be classified as non resident for tax purposes :)

[Sunday Driver]

[quote user="Stuarta"] In my view, that more or less confirms what several people have said here, that we should be classified as non resident for tax purposes :)
[/quote]

 

And so you will.  That's why you should go back and re-read Pickles' post about article 164 and how it applies to non-resident holiday home owners.