First tax return

[Payrac-man]

Hi

I will file my 1st tax return this year. I am on E109 courtesy of OH.If I put Mariés on the 2042 form page 2 section A,how do I go about telling them that she is non resident and not a french taxpayer.

[cooperlola]

I hope somebody answers this soon as it's a good question, thus I've given this a bump.  It may well be that your own tax rate depends upon her income, wherever taxed, and therefore you may have to declare her income even though it's not taxed in France and she is non resident.

[Will]

You have to declare your total worldwide income as a couple - you get taxed together in France. Having spouse/family/main home in France is sufficient to make your spouse French tax resident.

As she works in UK, she is (but probably you are not) UK tax resident too. Under the double taxation agreement, because she works in UK she will pay tax in UK and so you should declare her income in the box for sums that have already been taxed elsewhere. I am sure somebody can tell you which box this is, or you can take the form to your local tax office for advice.

Cooperlola is perfectly correct - depending on your circumstances which will determine the percentage of tax you would pay in France there may be some extra to pay, but probably not.

[Payrac-man]

Hi Will

I was not expecting that reply for sure I also have a 16 yr old son doing A levels, where does he fit into this he lives in UK and has no intention of moving to France.

[Payrac-man]

Hi again

Just another thought. How is house in France OH's residence principal when she lives 11 months of the year in Gloucester?

Also as I am spending more than 91 days a year in UK maybe I am UK tax resident too. Do I even file a tax return in France?

Life is so complicated

[parsnips]

[quote user="Payrac-man"]Hi again

Just another thought. How is house in France OH's residence principal when she lives 11 months of the year in Gloucester?

Also as I am spending more than 91 days a year in UK maybe I am UK tax resident too. Do I even file a tax return in France?

Life is so complicated[/quote]

Hi,

       Unless you are separated in the legal sense , then your french house, if it is your "principal" residence, is regarded as showing french residence for both of you, and you will have to complete a joint declaration. Earnings from employment, and tax, in the UK are shown on french form 2047 section VII , and the total (net of UK tax) is transferred to 2042 Box TI.   You may also be resident in the UK , especially under their new interpretation of the rules .

       However , I don't understand why people make such a big deal out of this--the double tax treaty ensures that you can only be taxed once on any particular item of income; if you had stayed in the UK, you would presumably be prepared to pay tax there, and if you have to pay on any income (such as bank interest or dividends), in France , the tax due is unlikely to be more than in the UK, and may well be less.

       As for the person with the son in the UK , you can claim allowance for him in France up to 21yrs  -- and up to 25yrs if he is in full-time education, if he is "dependant "on you. You do this by claiming "rattachement  " on the declaration.

[Will]

I too live more of the year in UK than in France, and work in UK, yet I am French tax resident as well as UK tax resident, and pay tax in both countries. So I can assure you that what I said is correct, at least based on the information originally given.

It's not just a matter of  '91 days', '183 days' or 'principal home'. France and UK apply different definitions of fiscal residence, so it is perfectly possible to be dual resident for tax purposes, though as I said above and Parsnips confirms, it is the double taxation agreement between the two countries that governs where any particular item is taxed and ensures that it is not taxed twice, so it's not that big a deal.

The son in UK was not mentioned before, as Parsnips indicates this is an area where your dual residence could work in your favour.

Social security and health contributions and benefits are generally a much more significant factor than tax. You are OK as you are covered with an E109 form, but people in general tend to overlook this in France. Maybe this is because tax and NI are collected together in UK but totally separately in France.

[Payrac-man]

Thanks Will and Parsnips

I get it now and realise that there will be little or no tax to pay in France. However social charges are another matter. If for example OH earns euro 20,000 from earnings and another 10,000 from building society interest and I have euro 10,000 building society interest how would you calculate the social charges?

Sorry to be a pain but I am really struggling with this.

[Will]

I'm not surprised you are struggling - it's extremely confusing.

First of all, there is the difference between 'social charges' (which are a form of taxation, and don't themselves carry any entitlement to health and social security benefits) and 'social security contributions'. You should not need to pay the latter on your OH's UK earned income, as that is subject to NI in Britain, which gives you your E109 entitlement and your OH gets NHS cover (with an EHIC for use in France).

However, building society interest is a different matter; yours would, I think, be subject to 'social charges' at 12.1% on the full amount, and the French tax man may look enviously at OH's interest as well as another part of your income that would be subject to these charges. With a household income equivalent to €40,000 you may well be asked to pay additional income tax in France as well as the social charges.

You really need to contact a qualified professional, because there should be more tax-efficient ways of investing what must be a pretty significant sum to generate interest at that level.

This site explains 'social charges' very well.

[Payrac-man]

Thanks for the replies

I think that moving to France was a mistake and I think that I will be finishing the house and then put it up for sale as we can live much cheaper in Britain

[parsnips]

[quote user="Payrac-man"]Thanks Will and Parsnips

I get it now and realise that there will be little or no tax to pay in France. However social charges are another matter. If for example OH earns euro 20,000 from earnings and another 10,000 from building society interest and I have euro 10,000 building society interest how would you calculate the social charges?

Sorry to be a pain but I am really struggling with this.[/quote]

Hi,

       On your income the social charge plus income tax in France on the interest is unlikely to be more than the 20% tax you  now pay on it in the UK.

       As Will says there are much more tax efficient ways to invest your money. The simplest is to put it in a "no-entry-fee" internet life assurance in the absolutely safe euro fund, paying about 4% net .(although on the internet, these funds are in no way "dodgy", and are run by the biggest and most respected assurance companies). You only pay tax and social charge on the gains when you make a withdrawal, and then only on the small gain element as opposed to the much bigger (tax free) capital element. With BS interest you have to pay tax and charges on the total annual interest, whether you withdraw it or not.

[Payrac-man]

Hi Parsnips

I understand the Assurance Vie is more tax efficient for the reasons you say but OH's income is used to pay for rental house in GB. I need ALL the interest from savings to live so would therefore pay tax and social charges on as much from withdrawals so there would be no gain.Also it in fixed interest long term investmens at 7% gross and cannot be withdrawn even if I wished to which I dont due to pawltry rates available at present. Then the exchange rate. I would not wish to exchange capital at current rates I have enough in euros to last a couple of years transfered when rates were better. With hindsight I should have done more homework on the French tax system but I never imagined that my OH would be tax resedent when she neither lives or works in France.

If we weren't married it would be simple.

Thanks again for all your help but I dont think France is for us.

[Will]

Of course, only you can make the decision about where you want to live. France doesn't suit everybody, so I wish you all the best wherever you end up. I'm sure you'll have gained a lot from your time in France; at least you will never regret not having tried it. Being away from your loved ones for long periods isn't a lot of fun, and I know that as well as anybody.

I'm certainly not going to pass judgement because hindsight is a wonderful thing and the general perception peddled by the glossy magazines and TV programmes is still that France is an inexpensive place to live, with cheap food, warm weather, loads of inexpensive booze, good long lunches and a great health service. That's not all true any longer, even for the retired, and early-retired people to whom it seemed so attractive a few years back. The exchange rate has made a lot of difference, while the cost of food, including eating out, is now more on a par with - even perhaps more expensive than - England. The summers may be warm but the winters are very cold, and heating is pretty expensive. Even the good things, like the health service, have to be paid for: many of the the early retired have caught a financial cold through the 2007 reforms, while the rest of us have to pay through the 'social charges' for the enormous health service deficit, whether we use the system or not. That's something the glossies definitely keep quiet.

It may be comparatively hassle-free and taxes may seem low if you don't work. However if you are employed, or worse still self-employed, they can be guaranteed to get you one way or the other in the end.