Is it a good idea to pay tax in France?

[Llantony]

I thought we should get into the French tax system as we are going to live here for the foreseeable future but someone told me on another forum that we could be worse off.

Main income is OH's teacher pension which I gather we cannot receive before UK tax is taken off.  Otherwise, my tiny state pension, some rent from son in our UK house and any interest we  get on savings.

Paying tax on rent is a pain, but it is income (tho well below market rate and we have no official rental agreement).  I don't suppose we could get our son to pay for a complementaire when we get one organised?  This might reduce the income received.

Another thought - with euro doing well against the pound, is it worth putting savings into French account?

[Clair]

[quote user="Llantony"]I thought we should get into the French tax system as we are going to live here for the foreseeable future but someone told me on another forum that we could be worse off.[/quote]

If you reside in France or if your family or main financial interests are in France, you have no option. You have to get into the French tax system,as the French tax system considers you a tax resident.

[quote]Quand est-on considéré comme ayant son domicile fiscal en France ? When are you considered to have its tax domicile in France?

Sont

considérées comme ayant leur domicile fiscal en France les personnes,

qu'elles soient de nationalité française ou étrangère, remplissant l'un des critères suivants : Are considered to have their tax domicile in France people, whether French or foreign, who fulfill one of the following criteria:

• avoir en France leur foyer ou le lieu de leur séjour habituel. who have their home or their usual place of residence in France. Il s'agit du lieu de résidence habituel ayant un caractère permanent. This is the usual residence of a permanent nature.

• exercer en France une activité professionnelle salariée ou non, qui ne soit pas une activité exercée à titre accessoire. who have a professional activity, salaried or not, which is not accessory to another main activity. Si

  le contribuable exerce plusieurs activités, l'activité principale,
  c'est-à-dire celle qui lui procure l'essentiel de ses revenus, est
  prise en compte. If the taxpayer has several professional activities, the main activity, ie that which provides the bulk of his income, is taken into account.

• posséder en France le centre de ses intérêts économiques. has the centre of his economic interests situated in France. Il

  s'agit du lieu où le contribuable a effectué ses principaux
  investissements, possède le siège de ses affaires d'où il administre
  ses biens. This is the place where the taxpayer has his major investments, the headquarters of his business from where he manages his goods and properties.

Source[/quote]

[quote user="Llantony"]Another thought - with euro doing well against the pound, is it worth putting savings into French account?[/quote]

As residents in France, each member of your family can and should invest the maximum allowed in tax-free accounts. Details HERE.

[parsnips]

[quote user="Llantony"]

I thought we should get into the French tax system as we are going to live here for the foreseeable future but someone told me on another forum that we could be worse off.

Main income is OH's teacher pension which I gather we cannot receive before UK tax is taken off.  Otherwise, my tiny state pension, some rent from son in our UK house and any interest we  get on savings.

Paying tax on rent is a pain, but it is income (tho well below market rate and we have no official rental agreement).  I don't suppose we could get our son to pay for a complementaire when we get one organised?  This might reduce the income received.

Another thought - with euro doing well against the pound, is it worth putting savings into French account?

[/quote]

Hi Llantony,

           I'm afraid getting into the french tax system is not a matter of choice - if you are resident here for more than 183 days a year you are liable to french taxation and are legally required to declare ALL your worldwide income.

           In your case, you may be pleasantly surprised.

           Teachers pension is taxable ONLY in the UK; Rent is taxable ONLY in the UK; but both must be declared here as they are used to calculate your french tax rate.(If you don't declare rent in the UK and it is totally informal, you could equally well regard it as a gift from your son and not declare it here, although not strictly legal).

           Your state pension is taxable ONLY in france, as is any bank interest etc. 

            If as seems likely your total combined income is modest, you may pay little or no tax on your state pension and interest- though you will pay social charge of 12.5% on your interest( less than the 20% that is usually stopped at source in the UK)

            You will pay NO french social charge on the UK  pensions or the rent.

             It is important to correctly complete your french tax forms 2042 and 2047- it may be well to wait till next spring ,when you must download the forms or get them from the tax office(they are not sent automatically the first time). In the meantime you should get a form P85 from the UK to formalise your leaving date. They will then send you a form FD5 which you should complete and send to the french tax office with your first french declaration - this, when processed will ensure that your UK state pension and interest will be paid Gross.

            If you are not yet in the french health system you should get a form E121 from the Dept. of Work and Pensions; if you are already registered for french health care this will almost certainly lead to the french tax office becoming aware of your residence (the computers now talk to each other).

             When you come to complete your french declaration you can get any help you need via this forum( using private messages if preferred).       

[mint]

Parsnips, congratulations!

As good a précis as I have ever read.

[bigears]

Hi

I accept what clair states with her 3 criteria.  Parsnips can you quote the text where the french talk about 183 days. 

[Ron Avery]

  "They will then send you a form FD5 which you should complete and send to the french tax office with your first french declaration - this, when processed will ensure that your UK state pension and interest will be paid Gross."   Parsnips the bit in bold is not true,

 

An FD5 only gets your pension paid gross, any tax paid to date refunded and your tax code adjusted if necessary, but it does not get interest on savings with banks etc paid gross.  Many UK banks and financial institutions will not pay interest gross to foreign based customers so you have to reclaim the tax by either completing an FD 5 annually to reclaim the tax paid, although some complete an R43 which gets the tax pain back and some just do a UK self assessment tax return, it all depends on your circumstances.

There is no 183 day rule in France, as Will has posted many times before, you can be in France for far less days and still be deemed tax resident it all depends on your own circumstances, however there are still some people who like to make out that they play the system when in reality they probably pay more tax and NI in the UK than if they were taxed in France as what they really are, residents.

[Sunday Driver]

There is actually a 183 day rule in France but it is only used as an arbiter when other conditions are in conflict. 

The immigration regulations (code de l'entrée et du séjour des étrangers) categorise you as resident once you have lived here for three months.  That also makes you tax resident and you are then obliged to declare your income from the day following your arrival in France.  So, in essence, if your 'home' is in France, then you are tax resident here.

Ron is quite correct - given that someone in receipt of a company and/or old age pension of up to around 19,500€ will actually pay no tax in France, there should be no doubt in anyone's mind about the benefits of being tax resident here rather than in the UK.

 

 

[KathyF]

[quote user="Sunday Driver"] Ron is quite correct - given that someone in receipt of a company and/or old age pension of up to around 19,500€ will actually pay no tax in France, there should be no doubt in anyone's mind about the benefits of being tax resident here rather than in the UK.[/quote]

How does that work out if health care costs are taken into account? Here in the UK we pay tax on our very modest pensions (early retired and my OH won't get the state pension for another 3 years).  However, as we are both over 60 and live in Wales we pay no health care charges, low NHS dental charges and optician's checkups are free. I am on regular medication for asthma and after 2 lots of breast cancer in the last 10 years, private health insurance would be prohibitive, even if I could get it. Would we really be better off overall if we moved to France?

[Jotty]

Over 60you wouldn't need private Heath Insurance. You would be covered  by a E121.

You would simply join the shameful group of sick British  immigants to France, who during their working life chose  to live in a country which charged very little in terms of tax in exchange  for a sub -standard level of Health care, but who suddenly ( surprise surprise) settle here and start demanding the same level of cover as French people who have paid for  years and years a much higher level of Social Security payments and who unlike the British continue to contribute after retirement.

If anything can make me sick it is the ill-imformed and greedy attitude of those  who come here as simple 'health tourists'

[Boiling a frog]

[quote user="Jotty"]Over 60you wouldn't need private Heath Insurance. You would be covered  by a E121.

If anything can make me sick it is the ill-imformed and greedy attitude of those  who come here as simple 'health tourists'



[/quote]

 

A bit like you then (the ill informed bit)

An E121 does not entitle you to full free heath care in France you still need a top up assurance which will cost from approx 500 euros a year per person if you do not wish to pay anything up front  for your medical care.

[KathyF]

[quote user="Jotty"]Over 60you wouldn't need private Heath Insurance. You would be covered  by a E121.

You would simply join the shameful group of sick British  immigants to France, who during their working life chose  to live in a country which charged very little in terms of tax in exchange  for a sub -standard level of Health care, but who suddenly ( surprise surprise) settle here and start demanding the same level of cover as French people who have paid for  years and years a much higher level of Social Security payments and who unlike the British continue to contribute after retirement.

If anything can make me sick it is the ill-imformed and greedy attitude of those  who come here as simple 'health tourists' [/quote]

Ouch!  What did I say to deserve that kind of attack? [:(] As it happens, I don't qualify for an E121 because I haven't enough NI contributions, so we would need full private insurance for the next 3 years if we were to move to France now.

Secondly, I didn't actually say we are planning to move to France. In fact we have no such intention, as we enjoy our time in both France and the UK, but I was interested to find out whether those in receipt of a modest pension would actually be better-off in France, when health care costs are taken into account.

Thirdly, I don't consider the UK level of health care sub-standard. I have had superb treatment both times I've been treated for cancer and have no complaints whatsoever.  If we were ever to decide to move to France full-time, it would be for the experience, not the health care!

[Ron Avery]

[quote user="Boiling a frog"]

[quote user="Jotty"]Over 60you wouldn't need private Heath Insurance. You would be covered  by a E121.

If anything can make me sick it is the ill-imformed and greedy attitude of those  who come here as simple 'health tourists'

[/quote]

A bit like you then (the ill informed bit)

An E121 does not entitle you to full free heath care in France you still need a top up assurance which will cost from approx 500 euros a year per person if you do not wish to pay anything up front  for your medical care.

[/quote]

And you don't usually get an E121 at age 60 unless you are a woman and paid an A rate stamp or a partner of someone in receipt of a UK OAP but heh don't let facts get in the way of a good old fashioned moan, to a certain extent you are quite right about the expectation!!

[Will]

The usual myths come round again - such as the 'facts' that you can choose whether to pay taxes in France or Britain, and that the French health service is free.

The original question was about tax. As is clear from the above, France and Britain have totally different definitions of residence, domicile etc. It may seem attractive to play these to your advantage, but in practice the double taxation agreement between the countries determines where any particular income is taxable. There must be something in the British-in-France psyche that opposes anything that tells you where to pay tax, where to register cars, etc, because people can be guaranteed to invent 'what-if' questions to try and find a situation that comes outside the loop. I don't doubt that there may be a few situations that are not clearly defined, but the vast majority are covered, and the overriding principle is that the officials determine where you pay, not you.

The official references are here for France and for Britain - the double taxation agreement (English text) here - note that this is the revised text, the previous (still current) one, can be found under ref. no. SI68/1869 if you want to compare.

But as is clear from this and other discussions, when people refer to 'tax' costs they often really mean the cost of personal taxation and health/social security provisions combined. In Britain, tax and NI are usually lumped together and collected together. In France, there are much clearer distinctions between the two, and health/social security contributions comprise several elements:

1. The basic contribution to couverture maladie universelle (CMU) - this is the part that is covered by forms such as E106 or E121; for established inactive French residents without E-forms it is charged at 8% of income above about 7000€. For those arriving in France more recently, and who will not have qualified for residence through being in France for five years, or for non-EU citizens, it is not available and will have to be covered by private health insurance once any E-form has expired.

2. Top-up insurance, to cover the cost of treatment over and above the amount reimbursed through CMU (average reimbursement is about 70%). This can be a substantial cost, though it can be offset against prescription charges in UK if you are trying to make a comparison. But don't forget that in UK prescriptions are free for several categories, such as over-60s, holders of a pre-payment card, and Welsh residents (and soon Scottish residents). Similarly in France, certain conditions (ALDs) can, by agreement between your doctor and the authorities, be covered at 100%; though other treatments will still be reimbursed at standard rates so you will still need a top-up to cover these.

3. The 'franchises' - sums of 1€ or 2€ that are not covered by the reimbursement of health charges. Small sums, admittedly, but they can mount up over a year.

4. More a tax than a health charge, but as it is called 'social contribution' it can be included here, and is a charge of which many people seem unaware, or forget it until the bill comes in - and that is the CSG/CRDS/PS that is levied on all income, with no lower limit; the amount can vary but is typically around 11%. Note that because of an EU ruling not all of the elements can be charged on pension income arising outside France.

So even though you may pay little or no personal tax, total costs can be similar to, or even greater than, in Britain.

Of course, there are many more reasons than purely financial ones to live in France. The health system may be one of those, but although good it is far from perfect. And detractors from the NHS (unjustified in my opinion, but we are all entitled to our views) should remember that despite its faults the British system is still the envy of most of the rest of the world - including President Sarkozy, who would dearly like to be able to bring the costs of the French health service under the same degree of control that applies in the NHS. So current levels of provision in France cannot be guaranteed, although substantial reforms will not occur without resistance.

Edit: 'inactive' added to [1] above - different rules apply to workers etc.

[dragonrouge]

What more can one add to such a comprehensive range of responses.

Of course taxation and the health costs and majority drivers but not the sole drivers.  If tax and you have a bundle go to Monaco or elsewhere health well..................you have the money to pay for it as in Sir Philip Green and his dividend income the majority of which is in his wife's name.  This is public knowledge (Admin from Companies House)

However a slightly differing angle.

We will be moving back to the UK always believing that France was not hopefully to be our final 'resting' place.  We are in the system and pay a lot to Groupama for our top up and due to pensions investments and still fee income quite a lot in tax and social contributions and even more so a relatively large amount of taxe d'habitation when compared to Normandie.

That in mind is there a 'beneficial' time to move back to the UK when considering the overlapping of the tax years?  Of course double taxation is noted but I was just musing on the subject and I suppose there is no optimal time to move back for what you pay here in taxes hopefully the tax guys in the UK will take into account before they dip their hands in your pot.

[bigears]

Hi

In my last post I asked for the text where the french authoriities refer to their 183 day rule.  Nobody has yet produced such information. 

[anniefromwales]

Bigears - you will find the 183-day rule stated here: http://www.ufe.org/fiscalite/determiner-sa-residence-fiscale

[Will]

It's also included in official definitions of 'principal residence', such as this:

• Les personnes qui ont leur foyer ou leur lieu de séjour principal en France.
Il s'agit de la résidence habituelle de la personne ou de sa famille (enfant et conjoint). Une personne travaillant à l'étranger pourra être ainsi considérée comme résident fiscal français si sa famille habite en France. Il suffit de séjourner plus de 183 jours en France (y compris à l'hôtel) pour remplir cette condition.

(from this link)

Although Clair's original definition of the French text about 'principal residence' is perfectly correct, it's worth pointing out that 'foyer' goes a bit further, in that it means, literally, family home and is taken in this context to mean the place where your family and/or dependents live, even if you spend most of your time elsewhere, as defined above.

[Cat]

But Bigears, you mentioned the rule yourself here

[quote user="bigears"]

hi

you can probably in practice get away with it.  If you want to abide by the letter of the 183 day rule go to the uk/spain/germany half way through the 12 month period.  If you are not working don't worry about it just keep a low profile. 

[/quote]

You've mentioned this rule several times now, were you wanting to start a conversation on how the bend the rule by taking a wee holiday in a country that has a double taxation agreement with France? 

But as you are the same person who recently said ...

[quote user="bigears"]

hi

Insurance for a trailer, I haven't even got insurance for my car!

[/quote]

...I suspect that you're just trying to stimulate some lively conversation, or something.

 

 

[Will]

There's always one who won't believe anything that doesn't suit him - and even when facts are proved will say that the sources are not sufficiently 'official' - regardless of the fact that they are used by professional for reference.

Going back to the earlier post, in practice there is no 'optimum' time tax-wise for changing residence. The portion of the French tax year for which the agreements say you are taxable in France is taxed there, similarly for the portion of the UK tax year. Because the respective tax years start and end at different times you can't really time things to minimise the paperwork. But although, in theory, these should be taken into account by the authorities, you can usually, in practice, under some circumstances, use the different personal allowances to minimise tax liability in each country. Some will disagree with this, and they are probably correct in terms of the letter of the rules, but my own experience suggests that you can benefit to a small extent because it's just not worth the officials' time doing all the sums involved.

If E106 forms are needed for your move, then by choosing your dates carefully you can get extended cover - but that's getting away from what was asked.

[anniefromwales]

It occurred to me that bigears might have misunderstood the rule - "If you want to abide by the letter of the 183 day rule go to the uk/spain/germany half way through the 12 month period" suggests he/she thought it meant 183 CONSECUTIVE days, not 183 days in total

[bigears]

hi

glad to see I'm being researched!  Forums can indeed become boring and do need an ocassional kick start to liven things up a wee bit.  If I say I don't have insurance for my car, it may not be a true statement, who is to know?  

Need to get plastering, have to get as much done as possible before I exceed my 183 days in france, and that french tax man insists I fill out the first tax form of my life itemising all my and my wife's worldy income and assets.  

[Ron Avery]

Blimey is it half term again, kids out to play again already.  How time flies.

 I used to be ignored by people, I also told lots of lies and was really really annoying  .......................... so  I became a teacher [:)][:P]

 

[bigears]

hi

Went to the pyrenees the other week for a walking holiday.  Great walks deliberately crossed the border a number of times. 

[Sunday Driver]

Is that another of your statements which may not be true.  Who is to know?  

 

[andyh4]

...............or care?