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Help with our plans... Long post - Sorry


Richard
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Hi All,

We are doing as much research as possible before we make the final decision to move to France.  With that, we’re hoping we can get some advice on our scenario, and especially around the taxation questions, as we have heard of many people having to return to the UK because the taxes are so expensive in France as compared to the UK (I find that hard to accept, so tell me if it’s not true).  Plus, we find the French taxation system so confusing at times.

Ok, bare with us whilst we describe our plans…..  

1. We own two properties in the UK, zero in France. 

2. We were planning to sell both UK properties, and use the proceeds to buy our home in France.  We would not purchase in France until the UK properties were sold. 

3. As we would not make France our permanent residence for a couple of years after purchasing the French property, we would move into rented accommodation whilst still living & working in the UK.

4. After a couple of years, we would then move to France permanently and declare ourselves French taxpayers & permanent residents

5. When we make the move permanently, our source of income will be pension income and savings/investments; and perhaps part time work in France.

Our questions are:

1. Is there a better way to do this?

2. What taxes (French) will we be liable for whilst still living/working in the UK and only coming to France on our holidays (most likely to renovate the property)?

3. Once we become French taxpayers, what taxes are we facing?

4. With regard to the health care coverage, we understand that the UK NHS will cover us for the first 2 to 2-1/2 years of living in France; after which we will need to supply private medical coverage until 5 years residency is established.   Are there any medical contributions that we will be responsible for?  Both before and after moving to France permanently?

5. Do we declare France as our principle residence even though we are still living/working in UK (>183 per year), as the French property will be the only property we own?

6. Are there any tax advantages/disadvantages to us declaring ourselves French taxpayers even though we will continue to work (PAYE) in the UK for the first couple of years after owning the French property?

Thank you in advance for any and all assistance!

Cheers!

Richard

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Your situation is quite straightforward.

As long as you live and work in the UK, then you are UK taxpayers therefore you are not subject to French income tax.  The fact that you will own a property in France that you visit for occasional holidays is immaterial. The only taxes you will pay here will be the usual property taxes.

Once you cease working in the UK and move into the French property full time, then you become tax resident here.  Tax liability will depend on your level of income so check out the forum Tax FAQ for details of what you will have to declare, then use the official tax office simulator to calculate your potential tax liability.

http://www3.finances.gouv.fr/calcul_impot/2011/simplifie/index.htm

As regards your question about healthcare before and after your move - before your move, you are essentially a visiting UK tourist so you use your EHIC to obtain any necessary medical treatment whilst in France.  Once you've moved here to live, your EHIC becomes no longer valid and your private health insurance pays for your treatment.

 

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   EDIT : Sunday posted while I was gibbering on!  He's far better at the tax stuff than I am!

I can clear up a couple of points but not all, by any means.

Firstly, you have no say in where you pay tax.  Nobody can declare themselves a resident, you either are a tax resident, or you are not, but it is possible to be a fiscal resident of both countries!  The definition is set by each government and does get complicated if you have feet in both camps.  Will and Sunday Driver are good at this stuff and you'll find thier lucid explanations all over this forum, if you have a search around.  They'll no doubt correct me if I get any of this wrong as your scenario is complicated.  However, I would say that in fact income taxes tend to be lower here whilst social security, healthcare etc is more expensive, as are indirect taxes like TVA (VAT).

However, broadly, if you work in the UK but come here for holidays, then you are resident in the UK, even if the property you live in in Britain  is rented.   Thus as long as you continue to work and spend most of your time in Britain, then you should continue much as you are tax-wise and your healthcare costs, if you need treatment in France, will be covered by an EHIC (what used to be an E111.)

The moment you move, though, even if one, other or both of you does some work in the UK and/or travels back and forth, then you will be obliged to fill in a tax form in France, even if you have no tax liability here, and you will have to sort out your healthcare provsions. 

All healthcare (with the exception of long-term chronic conditions - but here we get very complicated) in France tends to be reimbursed by the state at around 60 to 70%, and many -if not most - people take out a top up insurance to cover the remainder.  As long as you are using your EHIC, or are covered by the UK (12 to 30 months after you quit work in Britain, depending upon your employment history, whether you are self-employed etc etc ) then you will need to consider top-up.  Then, as you say, for the remainder of your first five years here, you would need full private cover, which must - by law - cover all doctors fees, medicines, hospital, transport costs etc etc - in fact in effect, it must mirror that provided by the state.  For a much more comprehensive overview - see our website (link below - voluntary and unfunded so we are not selling you anything, I promise!)  

Once the five years is up and until you reach UK state retirement age, you then pay 8% of your income for healthcare, as long as you remain "inactive".

If you work over here, or run a small business, however, you will register with one of the state schemes and can get health cover from the French state, for which you pay a percentage of your turnover.  There you lose me I'm afraid - I will leave others to explain more.

Once you reach UK state retirement age, you can again apply for the UK to begin to pay once again for your healthcare, but NOT if you have been attached to a French (business or work) related scheme, so you need to consider this very carefully when you do your sums.

I'm sure my post has posed more questions that it answers and that others will be along to correct me or expand on it but I hope it's a start and gives you some food for thought.  I'm sure there's loads I've left out.

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[quote user="cooperlola"]

   Once you reach UK state retirement age

[/quote]

Just to 'fine-tune' what Coops has said, this can be for whichever of the two of you reaches State Retirement Age .............. but, that individual has to be in receipt of a State Pension, not just to have reached the age of 65 or 60.  That individual can then apply for an E121 (can't remember what it's called now - it's changed) and his or her aceptance can normally cover the other half.

I do have an Excel spreadsheet which will calculate your tax liability over here.  Crucially. it covers the situation where one (or both) of you may be in receipt of an occupational pension from the 'public sector' (these continue to be taxable in the UK).

Just to give you a rough idea, it'll tell you your liability if you plug in some rough-cut figures for income (pension & investments).  Email me if you'd like a copy.  

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Thank you all for your quick responses.   This definitely helps to understand the initial property issue; just treat it as though it were our holiday home, even though it will be the only property we own.

Now what I need to understand are the various taxes that we will be responsible for once we make the move permanent and become French taxpayers....  So, let's say we have a state pension as income (I'll have my state pension from the USA; I'm dual citizen) when I turn 62.   In the interim, however, I plan to work in France (if possible).   Or, the other alternative is to make France our permanent home and I continue to commute to the UK.

What are the various tax rates for the following:

Payroll taxes?

Property taxes?

Social taxes?

Healthcare taxes?

Any other taxes I'm overlooking?

We just need to understand all of the various taxes, so that we can determine if it is even financially possible.   Would hate to get down there, only to find that we can't afford it due to the taxes.

Many thanks again!

Richard

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[quote user="Richard"]What are the various tax rates for the following:

Payroll taxes?
Property taxes?
Social taxes?
Healthcare taxes?
Any other taxes I'm overlooking?

[/quote]

OK, one by one:

  • Payroll - we're dealing with by email
  • Property - impossible to say until you settle on a place. There are so many factors & it's been done to death on here. Taxe d'Habitation & Taxe Fonciere (and I'm interpreting your description as meaning those, i.e. local taxes) depend on the size & lettable value of the property, your income, etc, etc. From seeing many, many posts on here, I think that if you were to budget €1500-ish pa, you wouldn't be far wide of the mark.
  • Social Taxes - I've forgotten the formula, but it's not a fortune.  Say €200 - €300 pa.
  • Healthcare Taxes - well, I'm not aware of a tax on it as such, but I'll stand corrected. However, the premiums are certain to be your major outgoing, given the circumstances you describe. I just don't know the numbers, but it wouldn't surprise me if you were in to €5k+ pa.
  • Any other taxes - the only one I can think of is Wealth Tax, which used to kick in at €750k of worldwide assets. This may [:)][:(] or may not apply to you!

This is very rough-cut stuff.  Without knowing your financial status (and it's none of our business) and without you having settled on a specific property, any numbers can only be 'finger-in-the-air'.  Hope this is a start though. 

    

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Might be worth adding that property taxes vary hugely from place to place, depending whether your house is in a hamlet or a large town and whether it is a prosperous area or a poor one. They are not income-related.

Can't remember if it has been mentione that once you become resident your savings and investment income will as a general rule become taxable in France.

I would be wary of laying too firm a foundation to build on 2 years hence, Sarko will certainly need to think up new ways of raising taxes to keep the French economy afloat which could turn the best laid plans on their heads, in much the same way that the restrictions on healthcare for inactifs did a few years ago. With this in mind I don't really see the point in selling up in the UK and buying in France, and then staying in the UK for 2 years during which time new legislation could be brought in tthat could throw all kinds of spanners into the works but you would already be committed to the move.
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[quote user="Bob T"]I may be wrong, but I don't think that a US pension is going to get you an E121 from the UK to get into the health system here.

[/quote]

Hi Bob,

What?   Are you saying that because I will be collecting my state pension from the States (e.g. Social Security) and not the UK that I won't be able to use the health system in France?  Even though I'm an EU citizen?

If this is the case, then our plans will now need serious u-turn action.....   Gawd, I can't imagine spending my "golden years" here in the UK. 

Cheers!

Richard

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Yep, I've just had it confirmed.... I won't qualify for ANY healthcare in France unless I pay for it fully myself?

Oh well! Guess it was a nice thought whilst it lasted...

Take care everyone! And, thanks again for all of your helpful advice?

Cheers!

Richard
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Two ways around it though. If your wife/partner manages to get a UK pension then they would qualify for the E form for healthcare and you would also be on that form as a dependant. The other way is to work legally and then qualify through your tax deductions into the French system.

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[quote user="EuroTrash"]Might be worth adding that property taxes vary hugely from place to place, depending whether your house is in a hamlet or a large town and whether it is a prosperous area or a poor one. They are not income-related. [/quote]

I think you should check on that.

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Bob T, my understanding is that you need to have a minimum ten years National Insurance contributions to qualify for an E121 when you retire.

Am I correct in my understanding from what an earlier poster has said, that if someone sets up an AE arrangement to qualify for health care they could be shooting themselves in the foot, as this will then preclude them using an E121 when they reach UK state retirement age?

Back to the OP, why don't you just divide your time between the UK and France, when you retire, as most Brits tend to do.
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[quote user="ITMA"][quote user="EuroTrash"]Might be worth adding that property taxes vary hugely from place to place, depending whether your house is in a hamlet or a large town and whether it is a prosperous area or a poor one. They are not income-related. [/quote]

I think you should check on that.

[/quote]

They are not income related in the sense that a high personal income means an increase in property tax. There is, I believe, a low level of personal income which can cause a reduction (discount) in a persons property tax.

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[quote user="Sprogster"]Bob T, my understanding is that you need to have a minimum ten years National Insurance contributions to qualify for an E121 when you retire. Am I correct in my understanding from what an earlier poster has said, that if someone sets up an AE arrangement to qualify for health care they could be shooting themselves in the foot, as this will then preclude them using an E121 when they reach UK state retirement age? Back to the OP, why don't you just divide your time between the UK and France, when you retire, as most Brits tend to do.[/quote]

I think you will find that the driving force for an E121 (S1 ???) is the phrase....." in receipt of a UK state pension",  ie, no pension entitlement = no E121.

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[quote user="Sprogster"]Gardian, i have a modest 87 sqm town house in the VAR and my property taxes come to EUROS 3,000.00 a year, which demonstrates how much property taxes in France vary from region to region.[/quote]

Oh dear, that's a bit of a bu**er, isn't it?

It does vary considerably though doesn't it? I was simply suggesting a very rough average (ours is €1250 p.a.) and there'll be plenty of others paying much less than that. (Cue a torrent of 'this is how much I pay' posts [;-)]) 

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[quote user="Sprogster"]Bob T, my understanding is that you need to have a minimum ten years National Insurance contributions to qualify for an E121 when you retire.

Am I correct in my understanding from what an earlier poster has said, that if someone sets up an AE arrangement to qualify for health care they could be shooting themselves in the foot, as this will then preclude them using an E121 when they reach UK state retirement age?

Back to the OP, why don't you just divide your time between the UK and France, when you retire, as most Brits tend to do.[/quote]

Hi,

    I have read posts here and elsewhere which suggest that if someone works in France and makes contributions which entitle them to a french pension (however small) and then subsequently get their UK pension( which they have to have paid via the french "caisse") , the UK will refuse to issue S1 (E121) on the grounds that the french are now responsible for the person's healthcare. This will result in them having to pay the same social contributions on their pensions (including the UK portion) as a french pensioner,

which I think is 7.3%.

     Maybe someone with personal experience can advise us? 

     

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[quote user="ITMA"][quote user="EuroTrash"]Might be worth adding that property taxes vary hugely from place to place, depending whether your house is in a hamlet or a large town and whether it is a prosperous area or a poor one. They are not income-related. [/quote]

I think you should check on that.

[/quote]

The taxes are not income-related. They are related to your property and the commune.

There are full or partial exemptions from taxe d'habitation for certain categories of people including a reduction for those on low income so yes in a way income does come into it. However this didn't seem to apply to the OP as exemptions only apply to French residents which he is not. But should probably have added that French residents aged over 60 don't pay taxe d'habitation at all so if he does still want to move here when he is 62, at least he wouldn't have that to pay.
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[quote user="sweet 17"]

May I ask where you get the idea that "French residents aged over 60 don't pay taxe d'habitation at all"?

I can assure you categorically that they do because OH and I pay it.

[/quote]

Sorry I'm having a (very) senior moment. I was thinking of tv licence and even then I'm not sure 60 is right. Ignore me everybody, I'll keep taking the tablets
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Parsnips et al.  There has been some lengthy discussion on the subject as to how employment in France affects one's entitlement to an S1 on another forum.  I have personally been trying to get to the bottom of this for some time because it seems to be critical information to me.  I do know that those who have worked here for some time are certainly thus affected.  However, what I cannot establish is how much work one needs to do for the competent state to change forever (or at least unless or until one moves on/back.)

A poster on another forum phoned up the DWP to ask what would happen to their S1 (Retirement E121) entitlement if they worked or had worked over here, and the answer he got back was not difinitive but certainly seemed to confirm that once you work over here then France becomes your competent state for health and social security and you thus remain in the French system (from a payments point of view) for your lifetime.

What I have yet to hear "from the horse's mouth" as it were is from anybody who has tried to get an S1 having run a business here who has been refused.  But whether that was because they simply kept quiet about it, or because the theory is untrue, I still do not know.  Like you, Parsnips, I woud be grateful for some first hand evidence.

However, it's moot for our o/p as their NI contributions history in the UK probably precludes them from getting a retirement S1 anyway.

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EuroTrash, don't pay any attention to Pacha.  He's having a joke but we don't need to laugh at it! (although he did make me smile [:D])

If your income (joint for couples) is above a certain level (I think last year it was about 16k euros), then, regardless of age, you pay taxe d'habitation including the TV element.

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