Tax Office back of envelope calculations

[Chrissie]

Have just spent a frustrating hour and a half trying to remain pleasant with the well-meaning woman at our tax office.  This is the third time we have been over the same old ground - my husband's UK pension is a public one and therefore must be taxed in UK, while mine is private and so is taxed here.  I dutifully declare his pension and the tax he has paid in UK every year, for taking into account for calculation of my French tax bill.

Am particularly worried as it seems from this woman's paperwork that the amount for our Revenue Globale is manually put into the system by HER, after she scribbles a lot on bits of paper and uses her calculator, and I don't think she is working it out right.

NOW:  I want to be sure I am arguing on the right lines here.  I know various tax rules have been quoted on this site but can't seem to locate them by searching(though I will continue to look), so do bear with me.  Let's ignore our piddly bits of bank interest etc and just look at the pensions:

If I earn x (gross) and he earns y(gross), then surely our Revenue Globale is "x plus y".  She should work out our tax bill on that amount, using her parts and abattements etc, and then  deduct the tax already paid in UK and bill us for the balance.  Correct?

What she seems to be doing is taking "x plus y minus tax paid", and then working out the tax bill on that amount.  When I protested, she said it all comes out the same, but my simplistic mathematical mind balks at this.  We are obviously getting to the stage where one of us is about to attack the other with a hatchet [:@], so if I am looking at things wrongly I will happily back down!  But why isn't she allowing the computer model to work out the tax directly from my online submissions?

In addition to all that, she insists that I pay Social Contributions on my pension, although I am covered by husbands E121.  Am getting a bit dizzy as we went through all THIS at length three or four years ago.  But when I locate the rule on that I feel confident enough to wave it at her.

Can someone reassure me on the major issue?  Parsnips?.......

Chrissie (81)

 

[Gardian]

Chrissie ............

Have pm'd you.

[Chrissie]

Thanks Gardian, I have replied by PM.

Chrissie (81)

[parsnips]

[quote user="Chrissie"]

Have just spent a frustrating hour and a half trying to remain pleasant with the well-meaning woman at our tax office.  This is the third time we have been over the same old ground - my husband's UK pension is a public one and therefore must be taxed in UK, while mine is private and so is taxed here.  I dutifully declare his pension and the tax he has paid in UK every year, for taking into account for calculation of my French tax bill.

Am particularly worried as it seems from this woman's paperwork that the amount for our Revenue Globale is manually put into the system by HER, after she scribbles a lot on bits of paper and uses her calculator, and I don't think she is working it out right.

NOW:  I want to be sure I am arguing on the right lines here.  I know various tax rules have been quoted on this site but can't seem to locate them by searching(though I will continue to look), so do bear with me.  Let's ignore our piddly bits of bank interest etc and just look at the pensions:

If I earn x (gross) and he earns y(gross), then surely our Revenue Globale is "x plus y".  She should work out our tax bill on that amount, using her parts and abattements etc, and then  deduct the tax already paid in UK and bill us for the balance.  Correct?

What she seems to be doing is taking "x plus y minus tax paid", and then working out the tax bill on that amount.  When I protested, she said it all comes out the same, but my simplistic mathematical mind balks at this.  We are obviously getting to the stage where one of us is about to attack the other with a hatchet [:@], so if I am looking at things wrongly I will happily back down!  But why isn't she allowing the computer model to work out the tax directly from my online submissions?

In addition to all that, she insists that I pay Social Contributions on my pension, although I am covered by husbands E121.  Am getting a bit dizzy as we went through all THIS at length three or four years ago.  But when I locate the rule on that I feel confident enough to wave it at her.

Can someone reassure me on the major issue?  Parsnips?.......

Chrissie (81)

 

[/quote]

Hi,

    The reason she does her own calculation is probably because the computer can't deal with what is a (fairly) uncommon situation. Your husbands pension (less charges ie. UK tax) and abattements (10% for pension) is added to yours to work out a "virtual " tax bill. The % rate of this bill is then applied to your pension; briefly:.... say your husbands pension is 20 000€ less 4000€ tax (UK) and yours is 10 000€ the calculation is 20 000-4000=16000-1600= 14400 + (10 000-1000) =23400........ notional tax due 638.......actual tax due 9000 x638/23400=245€  (tax figures worked using official ready - reckoner for 2010) --try substituting your pensions and see how it works out using the self-calculator which came with the notes to your declaration.If your pension is being taxed under the special rules for "rentes viageres" which it should be if you were the only contributor to it (no input from an employer), then you should only be taxed on a % of the pension depending on your age when you first drew it; unfortunately such pensions are liable to CSG. If it is a purchased annuity resulting from a company money-purchase scheme , then the full amount (-10%) is taxable , but no CSG is due.

                   See this official bulletin explaining the principle of the "taux effectif" , as you will see it can be quite complicated;

                   (Sorry about the black bit at the bottom)

APPLICATION DU TAUX EFFECTIF

 

La règle du taux effectif ne concerne que les personnes fiscalement domiciliées en France (métropole et DOM), quelle que soit leur nationalité.

Le taux effectif

Le taux effectif s'applique :

• aux personnes disposant de revenus de source étrangère expressément exonérés d'impôt en France par une convention internationale qui prévoit l'application du taux effectif ;

• aux salariés détachés à l'étranger dont les rémunérations sont, sous certaines conditions, exonérées et qui ont d'autres revenus en France ;

• aux fonctionnaires internationaux lorsque la règle du taux effectif leur est applicable.

Calcul de l'impôt dû.

• 1) Déterminer l'impôt correspondant au montant total des revenus du contribuable soumis au barème progressif (encaissés en France et hors de France), diminués des déficits antérieurs, des charges déductibles du revenu global et des abattements (personnes âgées ou invalides, enfants mariés rattachés).

• 2) Appliquer à cet impôt le rapport existant entre le revenu net imposable en France et le revenu net mondial.

  Pour déterminer l'impôt effectivement dû :

  • déduire ensuite la décote puis les réductions d'impôt ;

  • ajouter l'impôt proportionnel calculé sur les plus-values ;

  • déduire les crédits d'impôt.

  EXEMPLE

  Soit un contribuable marié, sans enfant, et détaché à l'étranger pendant plus de 183 jours au cours de l'année 2007. Il a perçu :

  • un salaire de 40 000 € à raison d'une activité exercée à l'étranger exonéré d'impôt sur le revenu, en application de l'article 81 A I du CGI ;

  • des revenus fonciers perçus en France d'un montant imposable de 8 000 €.

  Il a réalisé en France une plus-value de cession de titres de 7 000 € taxable à 16 %.

  Par ailleurs, il a effectué des dons à des œuvres d'un montant de 200 € et il a versé une pension alimentaire de 2 500 € à un ascendant.

   

  (1) IMPÔT CORRESPONDANT AU REVENU MONDIAL
  Revenus fonciers imposables	8 000 €
  Salaires retenus pour l'application du taux effectif : 40 000 €, soit un montant imposable, après déduction pour frais professionnels, de	36 000€
  Déduction de la pension alimentaire	- 2 500 €
  Montant du revenu mondial : 8 000 € + 36 000 € - 2 500 € = 41 500 €	41 500 €
  Droits simples, pour 2 parts, résultant de l'application du barème (Impôt correspondant au revenu mondial).	3 256 €
  (2) IMPÔT DÛ EN FRANCE
  Impôt dû à raison des revenus réalisés en France (8 000 € - 2 500 € = 5 500 €), calculé d'après le taux effectif :
  3 256 € × 5 500 € / 41 500 € = 432 €	432 €
  Décote : 419 € - 216 € = 203 €	- 203 €
  Réduction d'impôt relative aux dons aux œuvres : 200 € x 66 % = 132 €	- 132 €
  Impôt sur plus-value : 7 000 € × 16 % = 1 120 €	+ 1 120 €
  Impôt dû 1 217 € I hope this helps

  , soit un montant imposable, après déduction pour frais professionnels, de 36 000€ Déduction de la pension alimentaire - 2 500 € Montant du revenu mondial : 8 000 € + 36 000- 2 500 € = 41 500 € 41 500 € Droits simples, pour 2 parts, résultant de l'application du barème (Impôt correspondant au revenu mondial). 3 256 € (2) IMPÔT DÛ EN FRANCE Impôt dû à raison des revenus réalisés en France (8 000 € - 2 500 € = 5 500 €), calculé d'après le taux effectif : 3 256 € × 5 500 € / 41 500 € = 432 € 432 € Décote : 419 € - 216 € = 203 € - 203 € Réduction d'impôt relative aux dons aux œuvres : 200 € x 66 % = 132 € - 132 € Impôt sur plus-value : 7 000 € × 16 % = 1 120 € + 1 120 € Impôt dû 1 217 €

 

[Chrissie]

Those examples are brilliant, Parsnips.  I now understand the taux effectif.  And maybe I am actually doing ourselves down as I would have done the calculation, using the same theoretical earnings, by taking the abattement of 10% on my husband's 20,000 and THEN the UK tax of 4000 deducted: 20,000-2000-4000= 14000. Then plus 10000-1000 = 23000, instead of your 23,400.  So notional tax would be lower, (sorry, haven't got the old guide to hand at this instant) but then tax payable would be 9000/23000 times notional tax and therefore probably higher.

Fortunately (for the simplicity of things) mine was a non-contributory pension.

I will be sitting down again with calculator to see how it all compares with her figures.

Many thanks.

Chrissie (81)

[Un autre Gallois]

Hi Parsnips - I've been battling over the past couple of years to ascertain how the Revenu mondial is calculated & found this exchange helpful. However, this year I can't get past first base with the local Hotel des Impots as they insist that my public service pension should be treaed as "brut" dspite my protestations! Some previous years they appear to have been happy to treat it as net of uk tax (as I believe it should be treated). I've recently told them that in other parts of France the public service pension is treated net, but all they say is that they interpret the rules, but if I can demonstrate an error they will reconsider!! Perhaps we can go further into this by e - mail?

Un A G

[parsnips]

Hi,

        I'm having problems with the email on this site. I have seen something that gave me the impression that the basis for the revenu global may have changed since the new DTT; I will have to find it again and get back to you.

[Un autre Gallois]

Thanks Parsnips - your pm has been received ok from a "no reply" address!)

UaG

[Gardian]

[quote user="Un autre Gallois"]Hi Parsnips - I've been battling over the past couple of years to ascertain how the Revenu mondial is calculated & found this exchange helpful. However, this year I can't get past first base with the local Hotel des Impots as they insist that my public service pension should be treaed as "brut" dspite my protestations! Some previous years they appear to have been happy to treat it as net of uk tax (as I believe it should be treated). I've recently told them that in other parts of France the public service pension is treated net, but all they say is that they interpret the rules, but if I can demonstrate an error they will reconsider!! Perhaps we can go further into this by e - mail? Un A G[/quote]

I'm baffled.

Presumably you complete Form 2047 (the red one!).  On this form, your pension income goes in to Section VII and the instructions are absolutely clear in the explanatory notes: you show the gross amount, the tax paid and the nett.  The last figure is the one that gets transferred to Form 2042 (the main declaration).

The only caveat is around your 'public service pension'. This applies to "certains fonctionnaires internationaux" - presumably you are clear that your former employer qualifies in this respect and that your pension should continue to be taxed in the UK?  I have a sneaking feeling that some public service employment (NHS?) may not be in this category.

Anyway, I'll see if the Impots website reveals something, but I'm not holding my breath.  I'll pm you.

[parsnips]

Hi,

     At last I've found it , and it appears your tax office is well up to date. See  www.cabinet-henderson.com/img/Website_New_Double_tax_treaty_France_UK.pdf

     Quote follows;

"On the other hand, UK rental income or

government pensions (taxable in the UK by

treaty) will be treated as taxable in France

with a tax credit equal to the amount of the

French tax, provided the resident of France

is subject to UK tax in respect of such

income.

Moreover, while under the exemption with

progression previous method, the exempt

income was taken into account after

deduction of UK tax, the UK tax cannot be

deducted from the income with the tax

credit method.

On the UK side, the double taxation of

French source income is eliminated via a

tax credit equal to the French tax." The tax credit referred to gives a credit against french tax equal to the amount of french tax which would otherwise be due.

The form 2047 has not yet been altered to take account of this but it will be interesting to see if it is this year.  It is not quite as bad as it might seem , as this example shows;

    UK govt pension (say) 20000€ tax paid 2000€  ..........french taxable income 10000€

 Old method 20000-2000=18000 -1800(10% allce)=16200 + 10000€=26200 ..... notional tax due=990 actual tax = 990x10000/26200=378 ....after decote =128€

New method 20000-2000(10% allce)=18000+10000=28000.........notional tax due =1242 actual tax =1242x10000/28000=443......after decote =226€

It will also be interesting to see how many tax offices are up to speed on this this year.

    

[Gardian]

Parsnips ............

Hmmmm.  Is this for 2011 declaration, 2010 income?

[Un autre Gallois]

Thanks Parsnips & Gardien. I asked the local office to go through the calculation for 2010 liability as for the immediately preceding year's revenu mondial they had used my net (ie after deduction of uk tax) local govt. pension. It does look from the updated information that they are on the ball!

As a result of my request they conceded that they had omitted to include wife's state retirement pension in the calculation - they had consequently undercharged us! However, the human side of the local office came to the fore - they decided not to pursue the recovery of the amount undercharged!

Thanks again.

U a G

[Un autre Gallois]

oops, sorry for the mis spelling, Gardian!

UaG

[parsnips]

[quote user="Gardian"]

Parsnips ............

Hmmmm.  Is this for 2011 declaration, 2010 income?

[/quote]

Hi,

    The treaty entered into force 18/12/2009, so would probably apply to all 2010 income (declarable this year). I would be surprised if it was retrospectively applied to 2009 income, so  Un autre Gallois seems to have been a bit unlucky--maybe a late declaration?  On the other hand we may all find ourselves being re-assessed for 2010.

[Gardian]

Parsnips ..............

Thanks for that. Well, at the end of the proverbial day, the solution really is to make one's return online and let the software sort it out.[blink]

That approach takes away any 'local' interpretation of the rules.

[Un autre Gallois]

I have declared on line for at least three years, but with public service pensions taxed in the UK and other income taxed in France there apparently has to be a manual (as distinct from the computer doing it) calulation of revenu mondial & consequent liability. An appropriate message appears at the end of the electronic submission. Hence, one is not able to obtain the automatic calculation of liability.

I have always submitted returns well within the timescales over the past ten years!

Thanks again.

UaG

[Chrissie]

So my UK rental income, (even if below UK tax threshold), will now effectively be added to husband's UK pension for French calculation?..... Will the standard deductions (agents' fees, maintenance bills etc) be taken off prior to tax calculation, or will they just be looking at gross rental income, I wonder?

Are you already working on a new spreadsheet, Gardian?........ hint hint!

Chrissie (81)

[parsnips]

[quote user="Chrissie"]

So my UK rental income, (even if below UK tax threshold), will now effectively be added to husband's UK pension for French calculation?..... Will the standard deductions (agents' fees, maintenance bills etc) be taken off prior to tax calculation, or will they just be looking at gross rental income, I wonder?

Are you already working on a new spreadsheet, Gardian?........ hint hint!

Chrissie (81)

[/quote]

Hi,

Your rents have always been added to your other income to calculate the french tax rate.

As I see it (and we won't know for sure until we see this year's assessments),the only difference under the new method is that the UK tax paid will not be deducted . All other allowable expenses (agent's fees maintenance etc) will be deducted.

[parsnips]

Hi again,

      On re-reading the new DTT , I see that this change has been there all the time--we just haven't read it properly. See this extract of para 3 Art.24  especially sub  para (b):                                                                  " In the case of France, double taxation shall be avoided in the following manner:

(a) notwithstanding any other provision of this Convention, income which may be taxed or shall be taxable only in the United Kingdom in accordance with the provisions of this Convention shall be taken into account for the computation of the French tax where such income is not exempted from corporation tax according to French domestic law. In that case, the United Kingdom tax shall not be deductible from such income, but the resident of France shall, subject to the conditions and limits provided for in sub-paragraphs (i), (ii) and paragraph 4, be entitled to a tax credit against French tax. Such tax credit shall be equal:

(i) in the case of income other than that mentioned in sub-paragraph (ii), to the amount of French tax attributable to such income provided that the resident of France is subject to United Kingdom tax in respect of such income;

(ii) in the case of income referred to in Article 7 and paragraph 3 of Article 14 when that income is subject to French corporation tax, and in the case of income referred to in Article 11, paragraphs 1, 2 and 6 of Article 14, paragraph 3 of Article 15, Article 16, paragraphs 1 and 2 of Article 17 and paragraph 3 of Article 23, to the amount of tax paid in the United Kingdom in accordance with the provisions of those Articles; however, such credit shall not exceed the amount of French tax attributable to such income ;

(b) for the purposes of sub-paragraph (a) of this paragraph the term “amount of French tax attributable to such income” means:

(i) where the tax on such income is computed by applying a proportional rate, the amount of the net income concerned multiplied by the rate which actually applies to that income;(my note; CSG)

(ii) where the tax on such income is computed by applying a progressive scale, the amount of the net income concerned multiplied by the rate resulting from the ratio of the tax actually payable on the total net income taxable in accordance with French law to the amount of that total net income."

(my note;impot sur le revenu-this is the same calculation as for the Taux Effectif).

[cooperlola]

OMG, no wonder tax gets everybody's knickers in a twist.  What in god's name does this mean?: "Moreover, while under the exemption with
progression previous method..."(from Parsnips's quote on p2.)  If these people would only learn to write English we might have a chance.[:-))]

[Araucaria]

[quote user="cooperlola"]OMG, no wonder tax gets everybody's knickers in a twist.  What in god's name does this mean?: "Moreover, while under the exemption with

progression previous method..."(from Parsnips's quote on p2.)  If these people would only learn to write English we might have a chance.[:-))][/quote]

It's just a technical vocabulary for a technical subject.

If you didn't use the words "exemption with progression method" you'd have to say something like: "the method by which, although the income is exempt from taxation in the country of residence, it is nevertheless taken into account in calculating the tax bands for the rest of the income that is actually being taxed in the country of residence".

This method of dealing with foreign income isn't used in the UK, but I believe it is used in other countries and not just in France, so having a three-word phrase for it ("exemption with progression") isn't really unexpected.

After all, what's "common rail fuel injection" in words of one syllable?

[cooperlola]

But they didn't say that.  It says: "exemption with progression previous method."  I think it should say: "while under the previous 'exemption with progression' method", don't you? Then it makes sense even if one doesn't know what the method is or was. Now you've explained that at least I have a clue.  If their syntax is up the swannie, what hope have we of ever understanding?  But maybe keeping accountants in business by writing in rubbish English is really the point?[Www][:)]

[bubbles]

Yes, Coops.

Wholehearted agreement!