Wealth Tax

[smudger]

There's quite a lot of talk where I live (SW) re the wealth tax - the €700,000 + one. I suppose anyone with a house plus maison secondaire is probably over this threshhold and that they should voluntarily submit this return every June or July but does anyone actually know of any Brit expat who has paid this? Obviously I'm not asking for personal details but just would like to know if such folk exist. Whilst we have 'investigators' from the Social Security making short notice appointments hereabouts to 'discuss' whether the everyone has paid their full health contributions, it seems the local impôt really does keep themselves to themselves re tax. I mean how on earth would they find out about other assets in the UK and overseas? Would they even bother and would anyone in far flung places actually co-operate with them?

[Sunday Driver]

There were press articles earlier in the year which reported that around 25,000 Britons with property in France were having to pay French wealth tax. 

Given the number of people on this forum who move here without any idea of French regulations on taxation, heathcare, inheritance, urban planning, importing vehicles, etc, it's reasonable to assume that a proportion of those people were ignorant of the requirement to declare their assets and were therefore subject to some sort of investigation.

You really can't assume the lack of apparent activity on the part of the tax authorities means they are "keeping themselves to themselves re tax".  After all, that's what they're there for.

 

 

[Alan Zoff]

As a number of countries now share information with UK about bank interest paid to individuals, it's a fair bet that other information is shared. But unless the asset in the UK produces some taxable income (e.g. is rented out), perhaps unlikely that it will be picked up in this way.

Depends I suppose on how far the French taxman takes an investigation. Self-assessment in the UK is seen by some as a chance to leave details off the tax return. The problem arises when the Revenue do a full investigation and find you out. You will then get clobbered with hefty penalties (double the tax lost), interest and - in the most serious cases - a potential prison sentence! It's then that declaring the income in the first place might not have been such a bad idea after all. But whether the same applies in France......

[The Riff-Raff Element]

I'm intrigued - how does this wealth tax work?

[Dick Smith]

Is this an annual tax on assets or a tax on income, or what?

[Quillan]

The wealth tax applies to assets and investments and is aimed at the cash rich, income poor people. It came about because of the amount of people living in France who claim all sorts of benefits because technically they have no income. Basically if you complete a tax return and state you have a low or non existent income and receive discounted or free services like Tax Habitation, medical etc and you property(ies) are worth over 500,000 (ish) Euro they will have a look at you.

The urban myth about how this started was a story about a doctor who visited a really big expensive (like 2 million Euro) house with a couple of new, very expensive German cars on the drive. After dealing with the ‘emergency’ he asked for the attistation or whatever and later discovered the person got free medical (and all the other goodies) because in the French system they were ‘poor’.

How they actually work out what you have and have not got both in property value, assets and savings I don’t have a clue but I suspect that its related to the more increasing requirement to complete a French tax form (even if your income is zero).

Last year Living France did an article about the new laws and how they will be applied and about the requirements to complete tax returns and why if you live here. For example the TVA refund on building works after 1^st Jan 2007 can only be received by tax rebate through your French tax return the article said. So if you don’t complete a French tax return there will be no mechanism to get you rebate back according to Belvin Franks. That does not mean you don’t get it but you can’t physically get your hands on it. The idea is to ensure those living and completing tax returns in France get benefits which can then be checked which I personally think is fair.

Anyway getting back, the tax does exist but for many it will not effect them and if you are not known to the French tax man there is probably nothing to worry about. If however you came to France 20 odd years ago and bought loads of little houses for a couple of thousand each and they are now worth 200,000€ each you could find yourself paying tax.

If you think you may fall in to the wealth tax bracket then I strongly suggest you get some professional advice or see and accountant.

All these issues are covered in the Living France Magazine so why not order your copy today.

[Will]

The wealth tax is not new, it has been around for a long time. I suspect its origins are more bound up in the socialist principles and Napoleonic code that was set up post-Revolution to prevent the aristocrats once again getting the upper hand. But it does provide a handy tool with which to beat the cash-rich, income poor brigade who seem to have attracted a lot of recent attention.

In actual fact, for most, apart from the very wealthy to whom it is probably insignificant anyway, it is not difficult to avoid with the help of a decent accountant. Simple moves like raising a mortgage on your most expensive house can provide a way out of the wealth tax bracket.

If you have lots of little houses you will probably be assumed by the authorities to be a property speculator, another alien concept unless done as a properly registered and constituted business.

[Quillan]

Yes Will but acording to Belvine Franks it's the changes to how and on what its applied to i.e. propperty, assets (cars etc) and any money you have in savings. So to raise a mortgage does not get you out of it because what do you do with the money raised, it will still be counted (in full or part) one way or the other. Thats why I said if you think you might be caught seek proffessional help as neither I or you are really qualified to give advice on this subject and its now very complicated.

[Will]

Yes, as I said, 'not difficult to avoid with the help of a decent accountant'. Anybody going it alone in matters such as these is quite likely to get it wrong and is, frankly, an idiot. The mortgage solution, to the best of my understanding, is still valid but it has to be dealt with in the correct way, just as it always did. It has never been possible to just move wealth from property to the bank, it needs to be re-invested in a more tax-efficient way, and there are plenty of suitable tax breaks in the French system. There are other, probably better, solutions depending on individual circumstances, that was just an example of a simple way round the tax. This is why you need to invest in professional services. I just wish I had enough money to speak from personal experience.

Call me a cynic, but articles by the likes of Blevins Franks will always make things sound more complicated than they often are - the company does, after all, have a vested interest in selling its own professional services. At least in Living France's case it is made clear that the author is writing as a representative of a company, unlike some other publications and websites where such editorial is nothing more than advertising masquerading as independent advice.

[smudger]

Just try getting some info and a quote from Belevin Flunks and you'll understand why they try and put the fear of God and the French Taxman inti everyone. Are they actually French registered accountants? Or just financial 'advisers'?

[Quillan]

[quote user="smudger"]Just try getting some info and a quote from Belevin Flunks and you'll understand why they try and put the fear of God and the French Taxman inti everyone. Are they actually French registered accountants? Or just financial 'advisers'?

[/quote]

Sorry about spelling their name wrong but we all know who I mean. They are tax advisors and run seminars in France from time to time. I personally would use a French accountant in the area of France in which I live and if my French was poor I would take a translator. I say this because different prefectures/regions interpret laws differently and by using a local accountant there will be less problems as he/she should know what their area tax people want to know.

[The Riff-Raff Element]

Thanks - very interesting. I would very much doubt that we would

qualify (not until we win euromillions anyway) but I do wonder how

assets like houses would be valued given the gyrations of the property

market. Still, not my problem.

[nimportequoi]

[quote user="Jon"]Thanks - very interesting. I would very much doubt that we would

qualify (not until we win euromillions anyway) but I do wonder how

assets like houses would be valued given the gyrations of the property

market. Still, not my problem.

[/quote]

Jon, I remember seeing a reportage on French TV a while back in which the residents of Belle Ille ( a lot of whom were very poor) fell into the category of ISF just because their houses/land had gone up in value so much. They really couldn't afford to pay it and were protesting about the unfairness of it, but I don't know whether any exemptions have ever been made since. So I think the 'valuation' whatever it is based on, is important.

[Quillan]

I think, but I might be wrong, that it's something to do with Tax Froncier (probably spelt it wrong) which I think is based either on the prperty value or the rentable value which in turn relates to the property value. The thing is with the French is they never sort of think it through. The idea was to hit incomers and the French with second homes who bought yeas ago and have now seen a sizeable increase in their investment and to get hold of those that are property/asset rich but cash poor.

The latter also hits the sort of people who live in poor rural areas. It's hard enough for them and they have no interest in what their house and land is worth but somebody comes along, tells them it's worth X amount and they must pay Y amount in tax and most simply don't have the money. In fact often or not it's not the house so much as the land they own but they need the land to survive. We have people where I live that have a lot of land, some for the wood to burn in the winter, small vinyard for 20 or 30 bottles of wine a year, a few sheep or whatever on another piece and on the rest they grow veg. If they can't pay the tax, if it is applicable to them, they will have to sell the land. They have no job and are self sufficiant so if they sell the land to pay the tax they will have to go on the social the cost of which over the years will be far more than the tax collected probably.

Anyway as Jon says whithout the Euro Millions I can't ever see it effecting me either.

[LesLauriers]

Quillan - stop making it up!!

The tax started in 1982, was repealed in 1987 and reinstituted under the title ISF in 1989, currently some 400,000 households pay it.

It covers all worldwide posessions.

You take the current selling price of your properties (ask your local estate agent to give you a valuation), you can deduct 20% for your principal residence. If you rent property there are other allowances if you are providing low cost housing.

You then add all savings and investments belonging to each member of the family including the value of your life assurance policy, if you have one. You obtain a current resale price for any cars, bikes, boats, horses etc. the family own.

You add all this together and add on 5% of the total for the value of your household contents (you can put a value on each piece of furniture you have including cups saucers and spoons if you can be bothered)  so in essence it's everything you own including the shirt on your back!

Antiques, forestry investments, Spanish property, agricultural assets, works of art and certain shareholdings are exempt - speak to Will's accountant.

Deduct 750000€ from the total then deduct any debts including taxes payable in the coming year arrive at a figure then deduct 150€ for each child. Write out a check and deliver it to your local impots office, remembering to smile as you do so.

[Quillan]

[quote user="Leslauriers"]Quillan - stop making it up!!

[/quote]

Not being an expert my self (which I have already said) all I can do is rely on what I read on the subject so if the information is not correct in Living France take it up with them and don’t have a go at me.

Judging by your information I would think the figure you have quoted for people paying should be a lot higher and taking things like pension pots in to account there’s a lot of people who should be paying this tax.

As I said before and I say again if you are worried about this tax and think it might apply to you go see a French accountant (that’s three times I have said it now).

 

[BJSLIV]

I can't ever see it effecting me either

Its surprising how quickly you can fall into its grip with the recent rises in property values. 750,000 Euros isn't what it used to be!

Fortunately pension pots are excluded.

[Cassis]

[quote user="BJSLIV"]

Fortunately pension pots are excluded.

[/quote]

Thank Christ for that - is that definite?  An earlier post gave me the heeby-jeebies!

[Quillan]

Yep Leslauriers said that in his/her post hence I mentioned it, he/she has since edited it out. I thought exactly what I think you were thinking, a trip to the accountant again. I would have thought half the Brits in France would have been paying this tax if the pension pot was included. I think I will ask her (ed: my accountant) anyway next year just as a general enquiry as it were and exactly what the tax is all about.

[The Riff-Raff Element]

So, and just to be clear, the tax itself is what - 0.7% of the asset

value over 750k€? So on assets valued at 1million total one would be

expected to pay 7/1000 of 250,000€ = €1750. That could get boring

really quickly. I'd forgotten about my pension pot (well, it's soooo

far away [:P]). I was a good little boy and saved faithfully, so I'm

relieved that that at least is excluded, though, even if it were included, I don't think

I'd qualify.

[Sunday Driver]

Tax is 0.55% on 750,000to 1,200,000 then 0.75% on 1,200,000 to 2,380,000 and so on.

Provisional 2007 threshold is raised to 760,000.

 

 

[Deimos]

Quillan. Where on earth did you get that story ? Amazing.

My understanding is that is is basically all your assets less your liabilities. Thus, owning a house and then taking a mortgage on it would make little difference as you are just moving money between assets and liabilities - i.e. increasing your assets and increasing your liabilities (unless you blow all the cash on some amazing holiday). If you purchased the house recently then the purchase price (plus a percentage each year for increase in its value) is OK.

Unsure about the small bits you can tweak here and there (e.g. allowances for rented property, children). Threshold increases each year. As you only pay it on the total above €750000 you have to be pretty wealthy for it to cost a lot.

However, people who purchased their house in France AND kept property in the UK are more likely to cross the threshold and, as the UK and French tax authorities are now exchanging information people who are liable and not paying are more likely to be caught. Maybe people owning their house and living off savings might hit the threshold?

Unlike normal income tax, you calculate your liability and pay. You do not tell the tax man your details then wait for him to tell you how much you owe.

As an aside, I only recently submitted my tax return for 2004 (rather late !!). I have the impression they are "easier" on people who declare themselves rather than wait to get caught as, despite my return being rather late I was not fined and also not given a late payment penalty.

Ian

[Alan Zoff]

The ins and outs definitely require expert advice but, for those who might risk exceeding the allowance, I wonder if the answer is to look at creating a pension fund to hold say the UK assets. I know there are companies who will provide self-invested pension fund "wrappers" - but beyond that I have no information so don't expect the expert advice to come from me!

 I can well imagine that a property retained in the UK will often be regarded, to all intents and purposes, as the "pension".

[Deimos]

[quote user="Alan Zoff"]

 I can well imagine that a property retained in the UK will often be regarded, to all intents and purposes, as the "pension".

[/quote]

But probably not by the French taxman

Ian

[Quillan]

[quote user="Deimos"]

Quillan. Where on earth did you get that story ? Amazing.

[/quote]

Good grief Ian just go back and read my posts properly I'm not going to explain more than three times. By the way I think your statement is not correct. If I didn't know what to do or if I was liable I really wouldn't take any notice of what has been writen in this thread (including my own quotes) I would see a French accountant. There thats the fourth time I have said that.

They won't charge you a penalty for 2004 if you have only just declared yourself, they are rather hoping and I say hoping that they may get a lot more than the cost of a fine out of you.