If you have a question about tax in France, contact us at The Good Life France and we’ll see if we can help you with our expert’s help.
Question: I want to take a lump sum of my private UK pension. Is it better to take it before I move to France?
I have been told that if I take it in France I have to pay more tax? Also, if I do take it and then move to France, can I leave the money in the UK and pay income on the interest earned there or does it have to be transferred to France?
Answer: The first 25% of your pension fund is not considered taxable in the UK and if you decide to take more (under the new freedom of pension rules) then this will be taxable at your UK marginal rate (20 or 40%). However once you become resident for tax purposes in France, the 25% is taxable at a one off flat rate of 7.5% so if you are intending to take the lump sum this may well be worth considering before you move to France, but please do talk it over with a professional first. The remaining amount of your lump sum (ie more than the 25%) is considered as income, both in the UK and France and taxed as such.
Again you have the freedom of choice as to where to leave your cash assets. Any interest earned on UK accounts is subject to both French income tax and social charges (the latter charged at 15.5%). You may find that the interest is taxed at source by your UK bank and you would have to reclaim it using a form called the ‘France Individual’.
Question: If I become resident and pay tax on income in France – can I still have my pension paid in a bank in the UK and pay tax there?
Answer: You have the freedom of choice to have your pension paid into your UK or French bank account. However it is not a choice as to where you pay your taxes. There are certain rules which clearly indicate what makes you a resident of one country and non-resident of another. If you are considered tax resident in France then all income received must be declared on your French tax return. The DTT or Double Taxation Treaty will then dictate what is taxable and what has already been taxed and receives a credit. Certain pensions remain taxable in the UK and the rest will be taxable in France.
Question: I am on my second marriage with one child from my first marriage, my husband has two children from his first marriage. is there anything I can do to ensure that the house is left only to my child (my husband agrees)?
Although we have moved into my house in France, I’ve been told that under French law, if we both pass on, the house must be shared equally between all three children – is this true?
Answer: Succession law is complicated in France and I would always recommend you seek appropriate professional advice. It appears you own the house outright and your husband is not on the title deeds. If you have not made any other arrangements via a will or change of marriage contract, then currently your one child will automatically be entitled to 50% of your estate when you die and you are free to leave the remaining 50% to your husband if you so wish (or 100% to your child). Your step children have no rights to your property whatsoever.
You could consider protecting your husband in a different way by allowing ownership of the property to pass to your child, with your husband receiving a ‘usufruit’ or right of use to live in the property for his lifetime. This is done through a will and a notaire or French solicitor can advise.
Question: What are the best ways to earn interest and protect savings in France? Is there anything different from the UK?
Answer: There are no ISA’s (which are taxable) in France but there are a range of cash accounts offered by banks and La Poste. These are individual ‘Livret’ accounts such as a Livret A or Livret DDD.
There is just one lifetime allowance of €22,950 and €12,000 rather than an annual allowance. They currently pay around .075% and are tax free, but given the current rate of interest they are generally used as a kind of ‘emergency’ account rather than a full blown long term savings vehicle. There are others for those on low income, under 18’s etc.
A long term savings vehicle is an ‘Assurance Vie’ policy. It is effectively classified as a life insurance policy which gives it other benefits over and above the cash accounts. A good insurance company will offer one with different currency options, regular savings and/or lump sum options. It should also have a regular withdrawal feature and offer a variety of different funds including cash, bonds, share and unit trust style investment; something for everyone. The biggest feature is the ability to name specific beneficiaries who each receive an allowance against inheritance tax; regardless of their relationship with you. There are also tax advantages for withdrawals after 8 years so this type of policy is for those who need a nest egg.
A good financial adviser will have a range of international and French assurance vie contracts to suit your needs.
By Jennie Poate, Beacon Global Wealth, April, 2016.
The financial advisers trading under Beacon Global Wealth are members of Nexus Global (IFA Network). Nexus Global is a division of Blacktower Financial Management (International) Limited (BFMI). All approved individual members of Nexus Global are Appointed Representatives of BFMI. BFMI is licensed and regulated by the Gibraltar Financial Services Commission (FSC) and bound by the rules under license number FSC00805B.
