French Income Tax, Social Charges and Health (CMU) Costs - Help!

[Frenchjaguar]

Hello, I am trying to understand how the French tax system works in practice, prior to our move to France.

Our income is derived from an early retirement pension and bank interest received on savings.  This is how I understand that income tax etc will be applied:

Step 1 - Social Taxes calculated and applied:

Applied to 95% of gross pension.

Total = 7.1% (CSG = 6.6%, CRDS = 0.5% and PS = 0%), but allowance of 4.2% is deductable from income tax

Applies to 100% of investment income:

Total = 11% (CSG = 8.2%, CRDS = 0.5% and PS = 2.3%), but allowance of 5.8% is deductable from income tax

Step 2 - CMU Health Tax calculated and applied:

Applied to 90% of gross pension, but 100% of investment income.

An allowance of 7,085 euros is deducted from the sum of these, and 8% is applied to the resulting figure.

Step 3 - Income Tax is calculated and applied to net income:

I've assumed that to calculate our net taxable income, we deduct 4.2% from the gross pension figure and 5.8% from the gross investment figure.  The sum of these minus the 6,965 euro CMU allowance is our net household taxable income. We then divide this figure by 2 (there are just the 2 of us), and apply current tax rates to this figure.  The household income tax liability is twice this amount..

I understand we need to have 'top up' medical insurance cover and review (with a financial advisor) our savings to maximise returns and minimise tax liabilities.

Thank you for considering this! 

 

 

 

 

 

 

[Sunday Driver]

The easiest way work everything out is to run a couple of actual tax simulations through the French tax office [url=http://www3.finances.gouv.fr/calcul_impot/2007/simplifie/index.htm]on-line tax calculator[/url].

Scenario 1.

Assuming you will obtain E106s from the DWP to cover your healthcare contributions for the first two years (depending on your previous NI payment history)

Click the buttons for your marital status, enter your years of birth, then enter your gross pension amount in box AS (and BS if your wife receives one).  Enter your UK gross savings interest in box TS then click the validate button.  You then see a summary of your simulated tax bill. It will also show the social charges due on your savings interest. If you continue to earn the same amounts, then this will be your tax bill for the first two years. You do not pay contributions towards your state healthcare during this time.

Scenario 2.

Two years down the line, your E106s have expired and you are still under UK state retirement age.

Re-run the simulation again, but this time, as well as boxes AS/BS, additionally enter your pension income (total for both of you. if applicable) in box TL.  This will generate the CRDS social charge which is now payable on your foreign pension(s). Click validate, to see your new simulated tax bill which will apply from year three onwards.

Each simulated tax bill will also show your revenu fiscale de reference.  Take this figure from the first simulation (ie, what would be year two), deduct 7,083* euros, then multiply the result by 8% and that's your future annual state heathcare contribution from year three onwards.

* Figures based on current legislation.