Moving to France or buying property there should be the start of an exciting and fulfilling stage of your life. Dealing with complex tax legislation may be daunting, but with early and careful planning you can prevent headaches and make the most of tax-efficient opportunities.
The first step is to establish if and when you become liable for French tax on your worldwide income, gains, wealth and estate.
Generally, once you arrive in France intending to live there permanently, you become French tax resident the following day. But it is not always so straightforward, for example, you could also become tax resident if your main home or principal activity is in France.
You also have to pay attention to the UK Statutory Residence Test – the UK rules are even more complex than the French ones.
How you will be taxed
French taxation can be complicated… and high. Besides income tax peaking at 45%, you also face up to 17.2% ‘social charges’ on most income. Since 2018 investment income is taxed at a combined flat rate of 30%.
France also imposes an annual wealth tax, but this now only applies to real estate assets, and only where exceeding €1.3 million.
Structuring your wealth
Do not assume that what is tax-efficient at home will be the same in France. ISAs, for example, are taxable in France.
With expert planning, it is possible to structure savings, investments and assets to be tax-efficient – and maybe even pay less tax in France than in UK.
Are you better off, tax-wise, selling UK property while UK resident or waiting until you are living in France? Rules, rates and allowances differ in each country, so take advice to establish what works best for you.
There are various ways of owning property in France, with different tax implications. The most suitable option will depend on your personal situation. Advice is essential to understand your best approach.
UK pension options
Many expatriates find it beneficial to transfer UK pension funds into a Qualifying Recognised Overseas Pension Scheme (QROPS) to enjoy tax efficiency, flexibility and estate planning advantages over UK pensions.
Alternatively, you could potentially take out your UK pension fund as a lump sum and pay just 7.5% tax in France under certain circumstances, then re-invest the capital into tax-efficient arrangements.
However, there is no ‘one size fits all’ solution. Take regulated professional, personalised advice before making decisions.
French succession tax is particularly complicated. Getting it wrong can have unexpected consequences for your heirs, especially if you have children from previous relationships or want to leave assets to distant or non-relatives. These beneficiaries can face succession taxes as high as 60%. Beware also the ‘forced heirship’ rules in French succession law.
Ultimately, you need professional advice to make the most of tax planning, pension and wealth management opportunities in France. With proper guidance, you can have peace of mind that your financial affairs are in order so you can relax and fully enjoy your new life in France.