FRENCH TAXES = 50% OF EARNINGS?

[brown owl]

From another posting I have, re moving to Ille et Vilaine department, one reply suggests that Franch taxes can add up to 50% of earnings? Can this possibly be true? What is the breakdown of French taxes as a % of earnings? Are there any tax breaks or penalties for a UK citizen living & working in France for a UK based company? 

[Will]

A much publicised figure for cotisations (not taxes) is that they amount to around 46% of a self-employed person's taxable income. That was given to me by our accountant (who incidentally is in dept 35). So by the time you have actually paid tax as well then 50% looks quite feasible.

Note however that this is taxable income - not earnings. By keeping taxable income to a minimum level then both cotisations and taxes can be kept down. Note too that this applies to the self employed. For employed people the figure is around 20%, but employers pay a lot more in employer charges. So a good accountant is absolutely essential if you are not going to be bankrupted by charges, or run the risk of trying to do your own accounts and falling foul of the many rules and regulations.

You do have to remember that charges in France are high, even for those who keep the taxable income low. This is why you pay at least 25-30€ per hour for a properly registered tradesman, and why, if you are starting in business, you will have to charge this sort of figure. It also explains why there is such a thriving black market, but we cannot possibly suggest you have anything to do with that. 

[brown owl]

So does this mean that in the eyes of the French tax system I would be classed as self-employed and expected to be set up as such even though I am a salaried employee with a UK company only earning £20K-£25K p.a?

[Will]

If you are working in France, other than on a temporary basis, you have to be registered in France. Either as self-employed or employed by a French company. It's as simple as that.

[freddy]

Errr... I'm pretty sure thats not true. You can perfectly legitimately be employed by a UK company but tax resident in France. The tax office will try to convince you to register as self employed but you should not. This is basically allowed under the EEC freedom of movement laws. The reason that the french tax authorities will try to convince you to register as self employeed is that as an employee of an EEC company they can only charge you employee social contributions and they have to collect the employers contributions from your employer, but because your employer has no legal presence in France they can just not bother and there is nothing the french tax authorities can do about it - this annoys them so they shout at you and say you must register as self employeed so they can get the whole lot but it isn't true.

I got this information from a similar thread elsewhere so you should defintitely check this with a professional tax advisor before relying on it but it could be worth quite a lot if it applies to you.

 

[Gluestick]

Nice idea, Freddy!

If this were to be true, then, if we had any sense, we would all be living wherever in the EU we liked and working for a Luxembourg registered company!

This is a popular myth, malhereusement !

For example, if you "Live and Work" in the UK, then your employer has to have a registered UK operation, such as a subsidiary company, registered at Companies House or a Limited Liability Partnership, or a normal Partnership, or be Self Employed themselves: and additionally, registered with HM Revenue and Customs and registered for PAYE, when you would pay Class I NIC (National Insurance Contributions) as would your employer, too.

You would also be taxed under Schedule E, or if you like, PAYE.

All these regulations were tightened up, considerably, a few years ago now.

The only exceptions are certain types of payment for  professional athletes and sportsmen (meaning women as well of course!), actors and models on short-term assignments.

Where you work is where you be taxed. Immutable rule, in the main.

The only other exceptions are for certain persons (Consultants, Engineers, IT experts etc) who are visiting very short term for a specific and limited assignment: e.g. fixing a major installation.

If you can find a genuine, supportable and fully watertight case to argue against this with the Revenue authorities of various states, I suggest you set up a tax consultancy in Andora and you'll be a multi-millionaire in a few years! [;-)]

 

[Will]

Gluestick is perfectly correct, and my information comes from professional tax advisers (and high-ranking tax inspectors) rather than from 'another site'.

You are of course perfectly at liberty to duck and dive and avoid paying your dues as a French resident. Enough people do. That doesn't make it right.

 

[Owen]

Hello Freddy,

You are misinterpreting the EU legislation (in particular Regulation 1408/71) regarding free movement of labour. I come across this problem quite regularly as it affects healthcare planning. My experience indicates that if people do any healthcare planning at all it tends to be in isolation and rarely in conjunction with tax, financial and employment considerations. I am not a tax/financial advisor.

Will and Gluestick are correct in that the key factor is where the work is actually performed which determines where the business is registered and where taxes and, in particular, social charges are due. However, there are circumstances when you can be a tax resident of France but legitimately work for a UK company. For example, I have a client who is in every respect a French resident, including fiscally, but does regular spells of agency work in the UK on which he pays UK tax and NI contributions. But the cardinal rule of where the work is performed still applies. There are only rare exceptions/anomalies to this rule.

Regards

Owen

[email protected]