If you are buying a property or looking to move to France, it is a good idea to start your tax planning early. With suitable arrangements in place, expatriates can find France a very tax-efficient place to live – but the opposite can be true for the unprepared.
Ideally, you should take specialist, personalised advice before signing any paperwork for your French property or making the move across the Channel. This can ensure that you do not miss opportunities to save tax, and that your arrangements get the best out of your savings, investments, pensions and estate planning.
Even if you are already living in your new French home, there are usually steps you can take to improve your tax situation. However, getting it right from the outset makes things a lot easier – and cheaper.
Tax Planning for France
Anyone moving to France should prepare for a completely different tax regime to the UK. What you do before you move could be the difference between having tax-efficient arrangements in place and paying more tax than you need to.
While the tax burden in France can be high, it is not as bad as many expect if you have effective tax planning in place, and income tax can be considerably lower than in the UK. However, what is tax-free in the UK is not usually tax-free in France. You will need to review your saving and investment structures, and establish what will be tax-efficient in your new home. This may require restructuring your assets or moving capital from one arrangement to another.
Also, will you become a French resident or remain tax resident in the UK? If you plan to become resident in France, you may be able to time it to your advantage. For instance, you could transition at a date that will minimise your tax liabilities in both Britain and France and let you take advantage of tax-efficient opportunities. It is also possible to reduce taxes by buying or selling assets when resident of one country over the other.
Property Ownership in France
There are various ways of owning property in France, each with different tax implications. For example, several people – including children – can share ownership using a French property holding company called an SCI (Société Civile Immobilière). Alternatively, you could reduce succession tax by giving ownership to heirs while keeping the right to live in the property through an ‘usufruit’.
Ultimately, the option that works best for you will depend on a number of factors. Your family situation will be one of the most important, such as whether you are married, have children or stepchildren, and what you want to happen to the property when you die. How you will use the property is key too – will you live there full-time, treat it as a holiday home or rent it out? Advice is essential to understand your best approach.
Beware DIY Tax Planning
Tax is complex in any situation but things get more complicated when you have to factor in a foreign system and the rules of more than one country. You need to consider the tax regimes in both France and the UK as well as the interaction between them.
It is possible to do online tax research yourself, but it is easy to misunderstand or miss out on key information, which could end up being costly. Also, while available sources can prove useful in providing general facts and commentary, they will not be tailored for you. Your situation is unique and there is no ‘one size fits all’ tax solution. You should take personalised, expert advice to ensure the tax planning arrangements you use will be legitimate and suit your specific circumstances and objectives.
While advice is critical, bear in mind that UK financial advisers are unlikely to be up to date with the intricacies of French taxation and the frequent changes to the tax regime. It is a good idea to speak to an adviser who is based in France and has specific cross-border experience with British expatriates. With proper guidance, you can have peace of mind that your financial affairs are in order so you can relax and enjoy your new property and life in France.