Boring Tax Question

[adrianpmills]

This may be a bit of a long shot.  Does anybody know the french tax treatment of a UK with-profits bond for a resident of France? 

[Nick Trollope]

[quote]This may be a bit of a long shot. Does anybody know the french tax treatment of a UK with-profits bond for a resident of France?[/quote]

Obvious answer, unless I am missing something; The profits will be taxable (and must be declared on your return).

No?

 

[adrianpmills]

Maybe it's that simple - although how does one define profits? The annual 'interest' element is easy to work out and declare annually but the terminal bonus element, which accrues over the life of the bond, only becomes definite upon encashment - as does any market value reduction.  Also the bond profits are  deemed paid net of UK basic rate tax - therefore is there any method of relief (in the UK or France) if the profits are further taxable in France?  I can't find anything obvious in the UK-France tax treaty to cover these investments.  They are similar to French assurance vie contracts - but I assume as they are foreign investments they do not automatically attract the same tax treatment.  Any help would be appreciated. 

[makeiteasy]

Hi,

well, if you do read french you could find the answer here:

http://www.impots.gouv.fr/portal/dgi/public/documentation.impot;jsessionid=UQSJTDPCUF4ZLQFIEMQCFFGAVARW4IV1?pageId=docu_international&espId=-1&sfid=440&choix=GBR&x=30&y=10

Good luck

[adrianpmills]

Thank you Celine - good link.  I have already read both the UK version and French versions of the tax treaty.  However, I cannot find anything specific to this type of investment.  It has some of the characteristics of interest yielding investments and some of dividend yielding investments- equally it might be construed as income or capital gains.   If anyone else has with UK with profits bonds, or experience of their french tax treatment I would be keen to hear from them.

[Moulin Neuf]

With profit bonds - I am fairly sure that our accountant said unless we cashed them in we did nothing - but at cashing in point they had to be declared.  Ouch!

 

Jan

[Moulin Neuf]

With profit bonds - I am fairly sure that our accountant said unless we cashed them in we did nothing - but at cashing in point they had to be declared.  Ouch!

 

Jan

[adrianpmills]

Jan. Thank you for your answer.  Just to clarify - is that your french accountant talking about the french tax treatment?

[maxsan]

Perhaps it is the same situation as with the sale of Uk property. Where you have sold a house in the UK and are living here on the proceeds of that sale, it seems that the tax office is interested only in the interest you are earning on those proceeds. That is to say, they do not seem to be interested in the actual profit made on the house. The rule of thumb appears to be that if it originates in the UK but is not taxable in the Uk then it need not be decalred in France. Obviously there are exceptions to this rule but that is the feedback I gained from my local impots.  I have taken it that any endowments that I have rec'd are nothing to do with the taxman, only the interest that I have earned upon putting the proceeds of those endowments into a bank.  One exception appears to be Premium Bonds. 

[adrianpmills]

I would like to take that view as well, but it could be illegal.  I know that UK real estate currently escapes tax for a french resident - due to an effective loophole which the new tax treaty will close.  However 'moveable' property is generally taxable in the state in which resident.  So if it is not taxable in the UK then it is taxable in France.  My question is whether a UK with-profits bond is taxable in the UK or in France for a french resident.

[maxsan]

Surely, it falls within the scope of the French take everything into account when taxing you and therefore, even it is taxed in the UK, then you will be liable to inform the French tax via your declaration.  My point was that in the Uk you seem only to be taxed on the profit (interest) you then make from the proceeds of the bond.  A French equivaklent seems to be the sving programme that after something has been held in a certain vehicle for 8 years it is then exempt from tax. I think I was looking at perps and other savings vehicles when I saw that. I would have thrtought that the rules are probably the same for you insofar as you have invested in a Uk vehicle, presumably when you were in the UK, and that the profits from that fund are not taxable under Uk law. therefore you can assume it will be classed as an asset here as well and you are only liable for tax on the profit you then make.

[Benjamin]

I'm sorry adrian but I cannot definitively answer your question but is there not a case where you could argue that only that proportion of the interest/terminal bonus accrued after you became fiscally resident in France should be of concern to the French tax man. As far as the terminal bonus is concerned could this not be apportioned over the life of the bond?

Taking a simpler example, say that you had a deposit account in the UK paying interest annually in September and you became fiscally resident in April. Out of the interest that you receive in September surely the only part that the French taxman should be interested in is that which can be apportioned to the April to September period and you should account to the UK tax man for the proportion of interest received before then?

Or have I started too many other hares running here?

 

Benjamin

 

  

[Chrissie]

Did Adrian ever find out the definitive answer regarding with-profits bonds?  And if the end profit IS taxable in France, is it treated as a one-off capital gain?  (Can't see how it could be treated as income as you don't receive anything until you cash it in.)  In other words - which box on which form would it have to go in?!!

Chrissie (81)