Tax on UK Dividends

[fred flashman]

Hi

I live in France full time with my wife and children but i am a director of a UK ltd company. I travel back to the UK from time to time to work. I am payed in the UK by PAYE but the majority of my salary is through dividends (more tax efficient in the UK). Therefore i pay all the taxes that are due to the Inland Revenue.

As is required i filled in and filed a French tax return in May stating all my earnings /dividends etc for 2005 thinking that the"double tax treaty " applies negating any tax to pay in France. However i recieved two bills recently, one on the PAYE element which asked for no money and another for the dividend for "Contribution Sociales" which asks for me to pay 11% of the dividend to Tresor Public, although i have already payed tax on this dividend in the UK.

Can anyone help and advise me. It would appear that i am being double taxed.

Many thanks

Villa gei diot

 

 

[Cat]

It's not a tax Fred, it's an attempt to pay off the French national debt!

Read all about it here http://www.completefrance.com/cs/forums/780769/ShowPost.aspx

EDIT, sorry Fred, that was not only flippant but also incorrect, as it it in effect a tax, and goes towards paying off the French social debt.

 

[Cassis]

Contributions sociales are levied on all unearned income, from any source.  They are separate from income tax, so you are not being double taxed on income (yeah, right, believe that one).

[fred flashman]

Thanks for the responses. However when you say unearned income do my dividends fall into this bracket. Im payed via dividends for the work that i perform, and i do pay tax on them in the UK. Im really concerned. It doesnt seem correct that i should be billed (careful not to use the word "taxed") for the same thing by both countries. Afterall these are not savings they form part of my earned income(at least thats the way i see it)

Thanks

villa gei diot

[Cassis]

The French taxman does not see your income from dividends in that way.  That is why they are deducting Contributions Sociales.  But there are people on the forum who are more capable than me re tax matters and who may be able to advise further.

[Nick Trollope]

[quote user="fred flashman"]

Thanks for the responses. However when you say unearned income do my dividends fall into this bracket. Im payed via dividends for the work that i perform, and i do pay tax on them in the UK. Im really concerned. It doesnt seem correct that i should be billed (careful not to use the word "taxed") for the same thing by both countries. Afterall these are not savings they form part of my earned income(at least thats the way i see it)

[/quote]

The double taxation treaty only covers taxation (as in income tax). It specifically does not cover social contributions (such as NI or CSG). You have fallen into one of the many pitfalls of working in the UK & living in France - what is tax efficient there, is not necessarily tax efficient here, etc etc...

 

[Albert the InfoGipsy]

"fred flashman" wrote

<>

The UK Revenue doesn't see that as earnings either. Divi's are not 'reward for labour' but a distribution of profits to shareholders.

The reason divi's are more finance-efficient in the UK is because they are treated as UNEARNED income, so you don't pay NI on them. France does charge NI (certain types) on unearned income, so you get hit.

It may be worthwhile calculating which side of the channel is the most effective (cheapest!) place to pay social security and adjust your salary/divi balance accordingly.

[Deimos]

I think if the French authorities thought your dividends were actually payment for work you would risk being a lot worse off.

France is not the only country that has this problem. Many years ago I worked in the Netherlands for less than a April-April so when I returned to the UK tax people (UK) decided to tax me on everything I had earnt in Holland. They did allow me to offset tax I had already paid to the Dutch. However, at that time, Dutch Income Tax was exceptionally low, yet NI exceptionally hight so I ended-up with a massive UK tax bill as well (as UK tax people would not allow me to offset Dutch NI against UK tax).

Also, if you are declaring dividends, and are close to or over the wealth tax threshold, remember that the French authorities will now know you own shares in a UK company that have a value.

Its part of living and earning in different countries.

Ian

[Will]

Going back to the original question I am not sure what you mean by the PAYE element because there is no PAYE in France.

CSG is paid on earned income too, though it gets lost among the myriad other charges.

It is not strictly true to say that if you have paid tax in one country you will not be taxed in another under a double taxation agreement. In France your total household income is taken into account so if the income on which you have already paid tax in Britain takes you into a higher French tax bracket, there will be additional tax to pay in France. I prefer to think of it as tax paid in one country being credited against your tax liability in the other - a small but important difference.

Unfortunately you cannot be a social security tourist. The way it works, at least in Europe, is that the country in which you spend most of your time is the country in which you contribute to the social security system. Your social security state is not necessarily where you are fiscally resident. The only way to avoid French social security charges, unless you qualify for an E-form, is to spend over six months of the year elsewhere, and use an EHIC from your home country for French health care. Of course there is always the 'how do they know where you are?' question to consider, but that's another issue altogether.