UK pension funds and french tax

[St Bernard]

Hi

I would be grateful if someone could point me to a good source for answering the following questions in relation to a UK private pension for someone who is French tax resident.

1 Under UK tax rules, on or after reaching pensionable age, you can take up to 25% of your fund as a tax-free lump sum. Do the French authorities treat this as taxable income?

2 How do the French tax authorities treat income drawdown from a SIPP?

Many thanks

Jan

[AnOther]

You do not need to have reached retirement age to commute your pension and take the 25%, only age 55.

Tax on the 25% lump sum, or Pension Commencement Lump Sum (PCLS) as it is currently termed, is a bit of a grey area. There is one school of thought which says that if there is no tax liability in UK then there is none in France and another which says that as part of your worldwide income it should be taxed.

For example, in section 4.2.3 of this authoritative document http://www.blevinsfranksinternational.com/files/60/BF-PensionsMiniGuide.pdf it clearly and seemingly unequivocally states: 'Currently, pension tax free lump sums are not taxable in France'. What it doesn't say is whether that is because of the French tax rules (and I challenge anybody to point to where it is so written), or simply because the whispered advice is to take it and say nothing !

If you Google   france pension tax free lump sum  you'll find a mass of information.

Note that I am NOT advising or endorsing that, or any other course of action.

Income from drawdown would normally be liable to tax in France.

The good thing about drawdown is that it gives you the opportunity to manage your annual withdrawals and keep your overall income below the fairly generous French tax threasholds which a purchased annuity would not.

[idun]

hmmmm but now some lump payments in France have recently become taxable plus all the usual CSG etc etc. In fact many payments in France were stoppages free, until the terrible Sarko got in and now they are not.

So you had better check up with a decent french accountant who deals with international issues or les impots.

One thing is sure that each country has it's own way of looking at these things and just because one does or doesn't do one thing, it does not oblige the other in anyway to follow suite.

[Mikep]

Since it's tax free in UK, your pension provider has no need to inform UK Tax authorities. They in turn will therefore not need to inform French Tax authorities. In any case, it's a return of contributions, not income, so I don't think you have any liability to report it and cause unnecessary confusion to your Hotel des Impots.

There was some talk a couple of years back about these sums becoming taxable in France, but AFAIK nothing came of it in the final law passed, so it's still seems slightly indeterminate.

If you ask a French accountant, he will probably conclude that you should report it (since he will find nothing to say that you don't need to), but I would suggest keeping your head down -  I did on two occasions (two separate personal pensions) with no problem.

If it's a big lump, it might be worth keeping it in sterling for a while, rather than turning up at your French bank with a big cheque. My bank (Credit Agricole) recently called me in to explain a transfer from me to myself! Luckily it was a well-documented annual pension payment which I have (of course) always declared for income tax.

On your annual French tax return, personal pension payments (normal monthly or annual) go in box 1AS (or box 1BS for your spouse), and then do not attract Socialist Contributions.

[AnOther]

[quote user="Mikep"]Since it's tax free in UK, your pension provider

has no need to inform UK Tax authorities. They in turn will therefore

not need to inform French Tax authorities[/quote]Since when did or do

they ?

[quote user="Mikep"]I would suggest keeping your head down -  I did on two occasions (two separate personal pensions) with no problem.[/quote]

I would question the wisdom of admitting in that in a public forum [blink]

[parsnips]

Hi,

 I agree with Mikep, if you declare this the tax people will assume you think it's taxable , so they will oblige.  The worst that can happen is that they become aware (somehow) of the lump sum you have paid to a bank outside France, and ask you politely(according to their manual) if you may have omitted to declare something.  At this point, if you do not try to deceive, no penalties will be levied if you fail to convince them of the payment's non-taxable status.

 

[Mikep]

p.s. Just opened the Autumn edition of Living France and there's a Bill Blevins article on this topic, which seems to support my view expressed above.

If you read the article, be a bit careful about the QROPS topic - it lists all the good points, but there seem to be some disadvantages - being treated as annuity income for example saves you some income tax but this may be more than outweighed by the socialist contributions of 12%+.

I have quite a reasonable pension income and my marginal income tax rate is only 14%, with no socialist contributions to pay.

[St Bernard]

Thanks for the responses and pointing me in the right direction.

Jan