wealth tax

[Melody]

I am hoping to be able to move to France.

However, looking at the wealth tax bands French Embassy's site between third and half of the meagre income we would have, produced by renting out our UK property and from interest in UK banks, would be swallowed up by wealth tax, making the move impossible.

I assuming that the whole household's income is added up together and E720,000 is allowed tax free. I am also assuming that the funds underlying our future pensions would be considered part of our worldwide wealth.

With the new European directive, whereby savings institutions will inform one's country of residency about income from interest it seems even more important to get everything set up correctly.

Wrapping ones assests up in offshore trusts seems uncertain and very expensive to set up as far as I have read.

I would be very grateful for advice.

[Will]

As, for French residents, the tax is based on your worldwide assets, you won't be able to guarantee being able to escape it by putting funds offshore or in places like Switzerland. Maybe some entrepreneur ought to open a bank from a space station - but I'm sure legislation would soon catch up with it.

It is based on household assets, which means, in effect, property, savings and investments of couples and any minor children who do not file their own tax return.

Certain items are excluded, such as business property and some antiques. Also the value of a principal residence is reduced by 20% for wealth tax purposes.

Owning houses through a French company such as an SCI does not allow you to escape the tax, neither are trusts recognised in France. However, because France does not recognise trusts it can sometimes be possible to establish a trust before you move to France, but this obviously has to be done in the correct way in order to avoid increasing UK tax liability at the same time as reducing French wealth tax. As you rightly say, setting up such trusts can be very complex and of doubtful value unless you have very significant overseas assets. You cannot hold French property in a trust. 

There may be concessions in the next version of the France/UK double taxation agreement, but this is still under discussion. 

Of course, you really do need the advice of a professional (which I am not) rather than relying on information given on a forum. Nevertheless, I hope this helps.

[adrianpmills]

You may be able to count your UK house as a business asset - if it is let furnished and contributes greater than a certain percentage (can't remember exactly what, but 80% comes to mind) of your total income.  If you can then it will not be included in your total assets valuation.  I'm not sure that the assets underlying your future pension should be included - unless they are held directly by you.  www.impots.gouv.fr has guidance.

[Ron Avery]

I am reading this right or is this a wind up.

" However,  looking at the wealth tax bands on the French Embassy's site between third and half of the meagre income we would have, produced by renting out our UK property and from interest in UK banks, would be swallowed up by wealth tax"

You pay wealth tax on income over 720,000 €  and that is MEAGRE?????

[BJSLIV]

You pay wealth tax on income over 720,000 €  and that is MEAGRE?????

I suppose that the problem might be that you  have Assets of 720000 which aren't yielding  a significant income , but still have to find the money to pay the tax out of whatever income you do have.

[Melody]

[quote]I am reading this right or is this a wind up. " However, looking at the wealth tax bands on the French Embassy's site between third and half of the meagre income we would have, produced by renting o...[/quote]

Wealth tax is paid on world wide assets - not income. I think an income of E720,000 is huge!

[BJSLIV]

On the other hand up to 2.3 million euros the rate is only 0.55% so it wouldn't really break the bank would it?

If that really is enough to sink your plans I would advise staying in the Uk, because there will be worse shocks than that to come.  Health Insurance springs to mind, never mind unexpected renovation bills, increasing heating costs etc etc.

[Ty Korrigan]

And the price of a gardener...!

That will sink you...

[Will]

In my last post here, I forgot to mention that having a mortgage on your French house or houses can help reduce your exposure to wealth tax.

Mortgages on overseas (e.g. English) property can help too, though I think that's a bit less clear-cut.

[Gine]

There is an article in the Economist today regarding the French Wealth Tax (ISF). Interesting to note a rise in payers of 87% in the last 8 years. de Villepin says it will be reviewed by the end of the year, but no guarantee of reform.

Still, it seems they are beginning to realise that it has become an economically dangerous tax.

[BJSLIV]

But Mr Chirac did make a special point in his Bastille day interview that the wealth tax was an important demonstration  of social solidarity, and he was totally opposed to it's abolition.

[letrangere]

I would urge the poster to seek professional advice as there are ways of minimising your exposure to this tax if you seek good advice early enough.  And it's expecially important if you want to minimise tax on precious income.  A good advisor should be able to offer you a range of options.  I know many people laugh and shrug and wonder why anyone can get hot under the collar about paying a relatively small percentage of tax on what may appear to be a huge amount of money.  I'm sure they think if they're so well off, surely they can afford it.   But nowadays it isn't cash, it's invariably just bricks and mortar that catapults thousands of people who never previously considered themselves as being especially well off into the realms of the supposedly super rich.  And it does come as bit of a shock.  M