Marriage rates in France are at their lowest ever even with marriage being open to same-sex couples since March 2013. If you consider moving to France there is a tax-efficient and less formal alternative to marriage available to you, and this can even benefit same-sex couples buying French property, or couples where one of the partners is French.
This alternative is the PACS – the Pacte Civil de Solidarité. This is a contract entered into by a couple directly before the Tribunal d’Instance or before the Notaire who then registers it with the authorities. The relations between the partners are now brought closer to those of husband and wife. The rules governing the duties and obligations of husband and wife such as communal life, reciprocal assistance and material aid are now applicable to the PACS. For French purposes, a PACS gives the same tax advantages as a married couple.
A PACS can be entered into by:
- any couple living in France of whatever nationality,AND
- any couple living outside of France, provided at least one of them is a French national
Therefore PACS cannot be entered into by a non-French couple living outside of France. However, if the couple is registered as a civil partnership in the UK, they will automatically be treated as having a PACS from 2009. If an opposite-sex couple enters into a PACS, this is not recognised as a legal relationship in the UK, and that couple will just be seen as an unmarried couple for all UK purposes.
In France, both married and PACS couples are treated as one household for income tax purposes, so they can benefit from the Parts system that allows a couple to use both sets of rate bands to minimise income tax. This is not something to ignore if one partner has a higher income than the other. For example, my firm has had clients who have saved thousands of pounds a year in income tax simply by moving to France from the UK, let alone the further savings generated by investing funds tax-efficiently.
All couples living together, whether in a legal relationship such as PACS or marriage or not, are subject to wealth tax as a household, so PACS or marriage makes no difference here.
However, one of the most significant advantages of marriage or PACS is that when you die and leave assets to the survivor, these are tax-free in France. As assets passing to an individual unrelated by blood or a legal relationship pass at a flat rate of tax of 60% (with just a small exemption of €1,594 available), a PACS can represent a significant tax saving in France on death if a couple don’t want to marry or have a UK civil partnership already.
That said, PACS is not always as advantageous as marriage – a PACS gives the survivor no rights whatsoever over the deceased’s assets, whereas a surviving spouse is entitled to 25% as of right (any children of the deceased automatically inherit up to 75% of the estate unless action is taken to prevent this). Spouses can also enter into a Community Marriage Regime in France, whereby all assets held under the regime automatically pass to the survivor on the first death.
PACS partners can avoid French succession law on real estate located in France (as can any couple, married or unmarried) by inserting a clause tontine into the purchase contract of the property. This is essentially a legal fiction under which, on the first death, the survivor is held to have owned the property all along. The effect of this is that the survivor takes ownership of the property on the first death, and, if there is a PACS or marriage, no tax will be due on the deceased’s share. If there is no legal relationship, tax of 60% will be due.
If you already own the property and are not married, there are few options available to you, but there may be some ways you can avoid French succession law and you should consider taking advice if this is something you want to address.
Overall, whilst tax is no reason to marry, marriage has, in both the UK and France, certain tax advantages. Whilst you might not want to marry, there is an option if you are going to live in France, or are going to buy a French property and are entitled to enter into a PACS or be seen as having a PACS. In fact, around 90% of French PACS are between heterosexual couples.
It is relatively easy to end a PACS – as it is a contract, it can effectively be terminated through a court procedure by way of a letter from one partner to the other or simply by one partner marrying another person without any notice to the other PACS partner. Once out of the relationship, there is no requirement to provide for the former partner and no risk to assets acquired before entering into the PACS, a significant advantage for many heterosexual couples, particularly those who have been married before and stung by the divorce proceedings.