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Which Assurance Vie is best?

By Katriona Murray-Platon - Topics: Assurance Vie, France
This article is published on: 7th September 2020

07.09.20

In answer to the question of where do you put your money for maximum tax efficiency, an assurance vie is certainly the best place to put it. The French have continued to favour this investment over the years. According to the French Insurance Federation (FFA), in 2019 the premiums paid into assurance vies increased by 3.5% in 2018, to a total of €144.6 billion. I subscribe to a French financial magazine and every year they do an article on the best assurance vies in the market. This gives me an interesting insight into which products are recommended for the typical French investor.

What is interesting to note is that it is very rare for bank assurance vies to appear in this list. Banks have several assurance vie products under different names with different offers and it can be hard for the consumer to understand and compare performance and costs. Every member of my household, including my children, has an assurance vie, because even after social charges on the part in Euro funds, they are more likely to outperform any cash savings accounts. For example, the Livret A (the preferred savings account of the French) and the LDDS now only pay 0.5% interest per year and any other savings account offered by banks only generally offer between 0.2-0.3% interest which is not exempt from tax and social charges.

assurance vie

The French tend to favour investments in Eurofunds, believing them to be a safe option. Whilst this may be true if the investment horizon is less than three years, in the longer term inflation has a negative effect. The days of glory of the Eurofunds was around 2013-2014 when rates reached 2.5%. In 2019 the average rate on Eurofunds was 1.5% compared with 1.8% (net of fees) in 2018. However when compared with inflation, which was 1.8% in 2018 and 1.1% in 2019, there wasn’t much ‘real’ growth. Social charges are taken at source on such investments which further impacts performance. If your investment horizon is over three years and closer to between five and eight years then you should be investing at least partly in equities to produce a positive return above inflation. If it’s security you are looking for, the more diversified your assets, both in terms of asset classes and geographical location, the better your portfolio will be to weather market fluctuations.

The advantage with bank assurance vies is that you can start with smaller amounts to invest and build up with regular monthly amounts. However as a financial adviser with a high level of French, even I find it difficult to understand what exactly is in these assurance vies and where the underlying investments are held. Usually you are given the option of eurofunds and euro equities. It is rarely possible to hold assets in a different currency. We work with assurance vie providers who can allow you to hold assets in sterling and dollars as well as euros, which would allow you to leave this money to beneficiaries living in the UK or the US and avoid transferring the money into euros at today’s exchange rate. If you wanted to invest in euros but are holding sterling, over time it can be switched into euro funds at the appropriate time and with advice from your financial adviser.

It is not easy to change assurance vies. The French government changed the rules at the beginning of last year allowing people to change contracts but only with the same insurer. However this depends on whether the insurer will allow you to change contracts and whether they have anything better to offer.

Assurance-Vie-France-English

If you are in your 40s, 50s or 60s and your investment horizon is longer than eight years, and if you find that your assurance vie is not performing as it should, or you no longer get the proper advice/service from your financial adviser/assurance vie provider, you could consider encashing the policy and finding a better investment. Professional guidance from an authorised financial adviser is essential to determine whether this this option is appropriate for your circumstances.

If however you are over 70 and set up the assurance vie before 70, or you set up the assurance vie over eight years ago and are benefitting from the income tax abatements of €4600 per person (€9200) per couple, it may not be in your interest to change assurance vie providers. There are still many benefits of setting up a small assurance vie after 70 to benefit from other abatements, but that will depend on your situation and you should discuss options with your financial adviser.

I would always advise speaking to a financial adviser before going into any investment whether French or foreign. You need to be aware of the past performance of the investment (although this is no promise of future returns), the reputation of the investment company and the costs and how this may affect investment performance. For more information about assurance vies in general please see our guide but if you are considering this type of investment please do contact your local financial adviser.

What type of recovery do we foresee?

By Katriona Murray-Platon - Topics: France, investment diversification, Investment Risk, Investments
This article is published on: 29th June 2020

29.06.20

The days are long and sunny and lots of people are looking forward to beginning their life in France! June is a very busy month here in France because with the school holidays starting on 1st July and lasting until the end of August, June is the last few weeks to get everything done before most people go on holiday.

June has felt like a very busy month for me, with lots of meetings with future clients on the telephone, Zoom meetings and webinars. On 12th June I attended the Tilney Women’s Panel Event hosted by Tilney with guest speakers Emma Sterland (Tilney), Zahra Pabani (Irwin Mitchell LLP), Marcie Shaoul (Rolling Stone Coaching) and Charlotte Broadbent (Charlotte Loves), which was a great way to end the week listening to other women’s experiences of lockdown. Then, on 17th June, I took part in a seminar examining financial planning solutions for American expatriates, which was very interesting.

I finally got back on the road again on 18th June to visit a few clients, which was lovely. Whilst the weather wasn’t as great as I might have hoped, I was very happy to see the in-real-life faces of my clients, whilst keeping a respectable social distance during the meetings.

zoom Katriona Murray

During what has become a monthly Zoom meeting with colleagues this month, we were joined by Rob Walker from Rathbones who gave us an interesting view on the three possible scenarios that Rathbones are envisaging:

1) that there will a V shaped recovery
2) that there will be a progressive recovery but no second wave of the virus
3) that there will be a second wave and a second lockdown.

When asked to vote on which of these three scenarios seemed the most likely, about half of us suggested the second scenario and the other half opted for the third scenario. Rob told us that there has been a bias towards “stay at home stocks” with Amazon and eBay doing very well, if not for any other reason than people could not get to the supermarket during the lockdown so tended to favour ordering online. Cleaning products stocks have done very well as one can imagine. National Grid has also done very well and in addition is increasing its attention on renewable energy, which is unsurprising given widespread and growing interest in Environmental, Social & Governance (ESG) investing. Then there are the “Go back to work” sectors, such as retail, commercial property and tourism, which can only thrive if people do in fact go back to work.

In a possible indication of what lies ahead, Berkshire Hathaway (the company founded by renowned and highly successful investor Warren Buffet) has massively sold its holdings in airline companies. If a vaccine is found then these companies will see a rebound, but given the timing for a workable approved vaccine, this may not happen any time soon. Whilst US tech stocks are doing very well and have done very well during lockdown, Rob’s position is “Be defensive. This is no time to be heroic”.

Katriona Murray work revolution

There is no consensus on the way forward. The question is, do we want to go back to working the way we did before? For many workers going to work involves lengthy commutes on packed trains and buses, whereas the last few months have shown that many

of us can do our jobs from the comfort of our homes.

If this is a work revolution and companies decide to change their business models and allow employees to work more from home, what will be the consequences for commercial property ?

During the second part of the year the focus is going to be on Brexit and the US elections. Donald Trump is desperate to be re-elected. However, has the BLM movement hurt his chances? Will this encourage black voters to go out and vote to put Joe Biden in the Whitehouse? And in the UK, once the situation with Covid19 improves, the focus will be back on Brexit and what kind of deal the Prime Minister can agree with the European Union, if at all. The next six months are going to be interesting.

In France, a month after lockdown restrictions started being eased, the number of cases in the south west of the country still remains low. Schools have gone back with so far very few consequences.

Whilst July is a summer month, I will continue to work as normal (new normal). My children will continue to go to a holiday club two days a week. Like many of you, I am waiting to see whether a trip back to the UK to visit family will be possible in August which will determine our summer plans. I will not do a newsletter at the end of July but will probably do one at the end of August/beginning of September.

So for now, I wish you all a pleasant summer and look forward to getting back on the road to see even more clients in September!

There’s only two things you can be certain of in life…

By Katriona Murray-Platon - Topics: France, Tax, tax advice, Tax Efficient Savings, Tax Relief
This article is published on: 2nd June 2020

02.06.20

In France they have an expression “En mai fait ce qui te plait” which translated means that in May you do as you please. Well clearly this year we haven’t been able to do exactly as we please but we have been allowed a bit more freedom since the end of lockdown on 11th May. I haven’t yet felt the need to take advantage of this new found liberty, but as the children returned to school under acceptable conditions at the end of last week our work/home/school routine is set to change.

May is also tax season. Whilst you can get online to do your tax return in April, I personally have always preferred to do it on 1st May and during the month of May I notice an increase in client enquiries. Even though, in my previous role as a tax adviser, I used to do several hundred tax returns for our English speaking clients, I still find myself getting nervous when I do our annual tax return. There are so many bits of information that need to be assembled and I want to make sure that I have all the income, expenses and tax reductions properly entered before I finally press send.

French Tax Changes 2019

May is a good time to think about not only your tax but also your taxable income. When I worked in the accountancy firm, my colleagues and I didn’t have time to think about whether a client was paying TOO much tax or not. We just took the information provided and entered the figures in the boxes. When I joined Spectrum I realised that, as a financial adviser, I could take the time to sit down and do a full financial review with my clients to look into whether it made sense for them to be paying so much tax. One thing that comes to mind is UK ISAs and investment portfolios.

They are not tax efficient in France and a real headache for anyone or their tax adviser to have to work out. It took hours of entering in each dividend, interest and capital gain. You can still own a well diversified, multi asset portfolio within an assurance vie wrapper and save time and money when it comes to completing your tax return.

If you haven’t done your tax return then there is still time to do so. You can get our free tax guide HERE. In 2020, all households must do their tax returns online if they have internet access at home. If not they can submit a paper return. You have until 4th June if your live in Departments 1-19 or if you are non-resident, 8th June for Departments 20-54 and 11th June for Departments 55 to 974/976.

As regards the markets, global share prices have recovered strongly over recent weeks, with many investors encouraged by central bank interventions, including ongoing financial support and stimulus for individuals and companies. The prospect of successful vaccine development and the easing of lockdown restrictions have also fuelled optimism. Some of this investor enthusiasm, and expectations of a rapid economic recovery, may well be misplaced, but short term stock market direction is of course impossible to forecast.

There is almost certainly more economic difficulty ahead, but there will in time be a recovery (the only question is timing) and, as always, it is important to take the long term view. For now, our priority should be to ensure that our investments and pensions continue to be well managed regardless of the difficult economic circumstances.

In the words of Julian Chillingworth, Chief Investment Officer of Rathbones, one of Spectrum’s approved multi-asset fund managers,
“We think it’s important that investors concentrate on understanding which businesses can survive this current crisis and quickly return to generating meaningful profits and paying dividends. This is where we are concentrating our research efforts, generating ideas for our investment managers to use in portfolios as we work our way through this crisis.”

May has been a busy month with Zoom meetings with colleagues, friends and family and telephone meetings with clients and prospects. However as lockdown has now ended and my children are back at school (for at least two days a week), I will be tentatively making a few face to face meetings in June if my clients so wish whilst taking all the necessary protection measures.

If you want to speak to me about any financial matters or you know of anyone who, having moved to France, would benefit from learning more about managing finances in France, please do get in touch.

Guardianship for your Children

By Katriona Murray-Platon - Topics: Financial Planning, France, Succession Planning
This article is published on: 11th April 2020

11.04.20

Being the mother of two small children and the aunty of several more, like many parents, the issue arose quite early of what would happen to my children if something were to happen to my husband and I and what would happen to my sisters’ children should something happen to them. Whilst I don’t need to make a will from an inheritance tax point of view, because I have two children with the same father (my husband) and French law states that my half of our assets would go to my children as bare owners (nu propriétaire) and my husband as beneficiary (usufruitier), I do need to make a will regarding my wishes for my children’s guardian.

The first question is a personal one. Who, in your family or friends, would be best placed to be able to raise your children, in the country you want them to be raised in, in their language, in the way you want them to be raised? Do(es) this person(s) have children of their own? There are a range of different questions that are all particular to your situation. If you intend to appoint someone to be a guardian, then you should talk to them about it and maybe, if possible, talk to your children about it.

The second issue is the legal aspect. There are two ways to appoint a guardian in France. Firstly, you can appoint them in your will, or you could appoint them using a special declaration. Either way a notary needs to be involved. If no guardian is appointed by the parents, under aged children will be put under the protection of the court. A “Family council” will be appointed by the Guardianship Court (Juge des tutelles). This Family Council, made up of a minimum of 4 people, will have the responsibility of appointing a guardian (if one hasn’t already been appointed) who can be a member of the family or someone outside the family. Even if a guardian has been appointed but this person is unable to either adequately care for the child or properly manage the child’s assets, the matter can be referred to the court and another family member can chose another guardian.

If a child loses one parent then it is the other parent who will have parental responsibility. This parent can either care for the child themselves or appoint a guardian, who can be a member of the family or a close friend. If the parent is unable or incapable of looking after the child, then another guardian can be appointed by the court.

The third aspect is the financial aspect. If something were to happen, would the guardian have the financial means to look after the child(ren)? One thing you can do is make sure you have life insurance (called death insurance in France) which will pay out a lump sum and/or an annuity to the children for the rest of their childhood. Often when you purchase a house there is loan insurance that will cover some or part of the value of the house upon death of one or both parents. However, it may not be convenient or possible for the child to be raised in the family home and property as an asset is difficult to manage. Other liquid assets can be kept in bank accounts like Livret As or LLDs, but large lump sums (like the proceeds of a house or the lump sum from insurance upon death) should be placed in an assurance vie in order to protect it from inflation.

Luckily it is uncommon that a young child would lose one or both parents, but it is something that plays in the back of the mind of many parents so it is better having things in place to decide, who, how and with what means someone would look after your child in the best possible way.

Being prepared for BREXIT in France

By Katriona Murray-Platon - Topics: BREXIT, France, Pensions, QROPS, UK Pensions
This article is published on: 11th March 2020

11.03.20

On 31st January 2020, the UK left the EU. However, the real effects of Brexit, for those of us living in France, will not properly be felt until after the 31st December 2020 (what an interesting New Year’s Eve that will be!) and thereafter. Hopefully, by that time we will have a clearer idea of what our rights and responsibilities are. Until then there will still be much speculation and media noise, which may be just as confusing as it has been over the past four years.

One thing Brexit has established, from the very beginning, is that British citizens living in France, or planning to settle in France, need to get their affairs in order and decide where they would like to live for the foreseeable future. As British citizens we can always return to the UK if we so choose, but if we want to continue to live in France we must show that we have lived here continuously for the last five years or that we intend to continue living here in future.

The next few months are going to be very interesting and it is more than ever important for British citizens to consider some important financial changes.

Pensions after Brexit
In 2006, the UK introduced a law making it possible for UK private pension benefits to be transferred to a Qualifying Recognised Overseas Pension Scheme (QROPS), provided that the overseas scheme meets certain qualifying conditions.

For those pensions that can be transferred there are many benefits including:

  • No obligation to purchase an insurance company annuity, at any time
  • The potential to pass on the member’s remaining pension assets to nominated beneficiaries on death with minimal or no death duty payable. By comparison, currently a tax charge at the beneficiary’s marginal rate can be applied in the UK, where the member is over age 75 at death
  • A wider choice of acceptable investments offered, compared to UK pension plans
  • The underlying investments and income payments can be denominated in a choice of currencies, which can potentially reduce exchange rate risk
  • Potential to receive a larger amount of Pension Commencement Lump Sum compared to UK schemes
  • Depending upon the jurisdiction where the QROPS is set up, income payments may be made without the deduction of local taxes, meaning that income will only be taxed in accordance with the law of the jurisdiction where the member is resident

In 2017 the UK government announced its intention to introduce a new 25% Overseas Transfer Charge (OTC) on QROPS transfers taking place on or after 9th March 2017. This charge does not, however, apply where the QROPS is in the European Union (EU) or EEA and the member is also resident in an EU or EEA country (not necessarily the same EU or EEA country) and remains EU or EEA resident for the next five full UK tax years.

Many of those who work in the industry believe that after the transition period, it may no longer be possible for British citizens to transfer their pensions into an EU QROPS without incurring the 25% charge.

QROPS may not be suitable for everyone and much will depend upon the nature of the UK pension benefits being considered for transfer, as well as the person’s attitude to investment risk. Transferring a pension to a QROPS is not a decision that should be taken lightly nor in haste and proper financial advice with an experienced adviser is essential. Even when the decision has been made to transfer the pension it may take a good few months to complete, which is why, if you are even considering this possibility, it is important to contact a local adviser to explore what your options are.

Taxes after Brexit
As tax between the UK and France is determined by the Double Tax Treaty, this will not be affected by the fact that the UK has left the EU. However, whilst not directly taxed, a lot of UK income, such as UK rental income, is added to the taxable base and increases the tax margin of the French taxpayer. If you intend to live in France, you may want to consider whether it is really in your interest to hold onto UK assets.

It is possible to protect your capital investments in France and ensure that they can grow in a tax efficient environment by way of an Assurance Vie policy. French Assurance Vies or French approved foreign Assurance Vies offer valuable benefits when it comes to income tax, inheritance tax and estate planning. Foreign portfolios and bonds are not treated as Assurance Vies and any gain is subject to tax and social charges irrespective of whether this income is taken or whether it is brought into France. If you are French tax resident, you are taxable on your worldwide income in France. Proving that you are French tax resident will be an important factor for establishing the Right to Remain in France.

Being resident in France does not necessarily mean that all your assets have to be in France or have to be in euros. There are many opportunities for holding sterling based diversified portfolios in a tax efficient manner.
For anyone intending to live in France for the foreseeable future, be aware that today’s valuable financial planning opportunities are unlikely to remain beyond the short term (31st December 2020 could be an important date in this respect). Contact me, Katriona Murray, and I will be happy to arrange a meeting.

Brexit – What now?

By Katriona Murray-Platon - Topics: BREXIT, France, UK Pensions, United Kingdom
This article is published on: 18th December 2019

18.12.19

Some of you, like me, might have woken up on Friday and after hearing the election result felt utterly depressed. Irrespective of how the vote could or should have gone, or who you may have voted or wanted to vote for, this result will seriously affect the Brits living in Europe. Brexit is now more likely than ever, so what does this mean for us? Well luckily, there is someone who is somewhat of an expert on the matter, Professor Sébastien Platon, Professor in European Law at the University of Bordeaux and incidentally my husband! Over breakfast I asked him a few questions.

So, what now?
The British parliament must first pass the EU (Withdrawal Agreement) Bill, and then they have to agree on the Withdrawal Agreement itself. Given that the Conservatives now have a majority it is likely to be passed. Either later or at the same time, the European Parliament also has to agree on the withdrawal agreement. If all of this gets done by the 31st January, Brexit will happen as planned. If not, the UK will have to request ANOTHER extension which would have to be agreed by the other 27 member states.

During the transition period are all European rights maintained?
Apart from the right to vote and run as a candidate in EU elections and municipal elections, the right to participate in European citizens’ initiatives and the UK’s right to vote on EU laws, all rights, including the right to free movement, are maintained during the transition period.

Does a British citizen who has not yet settled in France still have the right to do so after 31st January?
Yes. Up until 31st December 2020 all British citizens can come and settle in the EU. After the transition period, those who have established residency in the EU and wish to bring their family members (spouses, partners, direct descendants under 21 or dependent, direct relatives in the ascending line) to live with them can still do so.

Can the transition period be extended?
Yes, if the UK and EU agree to extend the transition period. But, unlike the Brexit extensions, they cannot ask for an extension the night before the 31st December 2020. A decision has to be made before 1st July 2020 extending the transition period for up to 1 OR 2 years. British citizens would therefore have until the end of the transition period (or extended period) to settle in the EU.

What about healthcare?
During the transition period, the EU social security coordination rules will continue to apply. The British who reside in France (or any other member state) and are in the UK health system but not the French health system can continue to benefit from this health cover as normal. After the end of the transition period, these rules will continue to apply to:

• UK nationals subject to the legislation of a Member State at the end of the transition period,
• UK nationals who reside in a Member State while being subject to the legislation of the UK at the end of the transition period,
• UK nationals who pursue an activity as an employed or self-employed person in one or more Member States at the end of the transition period and who are subject to the legislation of the UK,
• Their family members and survivors
These persons will be covered as long as they continue, without interruption, to be in one of these situations involving both a Member State and the UK at the same time.

What about pensions?
For the persons I’ve just mentioned, the time worked in the UK will count towards an EU pension and inversely any time spent working in France would contribute towards entitlement for a UK pension should they wish to return to the UK when they retire.

Do we need to apply for cartes de séjour?
During the transition period you do not need them. After the transition period each member state has the right to require UK citizens to apply for a new residence status, the sole purpose of which is to verify whether the applicants meet the conditions set in the withdrawal agreement. If they do, they have a right to be granted the residence status and the document evidencing that status (which will NOT be a “carte de séjour”). The French administration cannot refuse this status if you meet the conditions. The deadline for submitting the application shall not be less than 6 months from the end of the transition period. The host State has to ensure that any administrative procedures for applications are “smooth, transparent and simple, and that any unnecessary burden are avoided” with applications being “short, simple, user friendly and adapted to the context of” the agreement. Only once the agreement has been ratified will we know if and how the French Government wants to proceed on the matter.

Whilst I do not agree with Brexit and wish things had happened differently, at least after four years of uncertainty there may now be some progress. The pound bounced back up on Friday and this election result is likely to have a positive impact on the markets and portfolios.

Understanding the Taxe Foncière

By Katriona Murray-Platon - Topics: France, Taxe Foncière
This article is published on: 19th October 2019

19.10.19

As the last quarter of the year approaches, there is one thing that is certain and that is that taxes are due. In September the final instalment of the income tax must be paid, in October the Taxe Foncière is due and in November the Taxe d’Habitation must be paid.

Taxe Foncière is a tax paid by property owners on the 1st January of each tax year. Note that it is paid by the owner not the occupant and applies to both buildings (houses or apartments) and land (agricultural or constructible).

If you sell your property or land, the tax liability for that year is apportioned to each party, by the notary, according to the timing of the sale.

You may qualify for an exemption if:

    • the property is a new construction used as a main residence (the exemption is for 2 years)
    • you are in receipt of disability allowance
    • you are in receipt of old age allowance
    • you are over 75 (depending on level of income)

The tax office may also allow an exemption for unoccupied property which is habitable and normally rented, provided that:

    • it is unintentionally unoccupied
    • it is unoccupied for at least 3 months
    • part or all of the building is unoccupied

However, as the tax reduction is not automatically granted, you have to apply for it and demonstrate that you qualify (with reference to the specific points above).

Taxe Foncière is based on rental value according to the land registry multiplied by a rate set by the local authorities – so rates differ depending on where the property is situated and from one year to the next.

Any building on your property that is a permanent fixture could result in an increase of your Taxe Foncière. If you install a swimming pool (sunk or semi-sunk) then this could increase your Taxe Foncière. You have 90 days to declare to the tax offices that you have installed a swimming pool but you could also be exempt from paying the Taxe Foncière for the first 2 years.

The tax office sometimes makes mistakes when calculating Taxe Foncière liabilities, in which case you should contact your local office to ask for an explanation and rebate. You have until the 31st December 2019 to challenge your 2018 calculation. Additionally, the tax office sometimes doesn’t apply exemptions for which you qualify.

You can contact the tax office via your online account on the impots.gouv.fr website or by email or letter sent by recorded post.

Paying your taxe foncière monthly spreads the costs throughout the year. You have to settle in full by the middle of October, so if you do pay monthly and the amount hasn’t changed this year, you will have nothing to pay in November and December.

The long and complicated relationship with social charges

By Katriona Murray-Platon - Topics: France, Social Charges
This article is published on: 12th February 2019

12.02.19

Most people accept that when you live in a country you have to pay local taxes. Equally, most people can understand the fact that in order to get social benefits such as unemployment benefits and healthcare, you have to pay social security contributions. France, on the other hand, has another tax: social charges, which isn’t actually called a tax, but in fact operates very much like a tax.

Social charges were first introduced in 1991 and have been much grumbled about by French tax payers and expats living in France. It is not one social charge, but is made up of various types of social charges, the rates and combined rate of which has increased progressively over the years. Social charges are taken from all types of income, but where they have caused the most problems is the social charges on capital and rental income, especially for non-resident tax payers.

In 2015, following a challenge by a Dutch national, Mr De Ruyter, the European Court of Justice held that the social charges on rental and capital income were not a tax but a social security contribution and that an EU national should not be required to pay social charges in France when they are paying or have paid social security contributions in their own Member State. The French Administrative Court, the Conseil d’Etat then confirmed that decision and orders were issued to the French tax offices to reimburse the social charges paid to non-resident EU nationals or resident EU nationals who were covered for their health insurance by another EU system (under the S1 form, for example). This led to hundreds of thousands of pounds being reimbursed for the tax years 2012, 2013 and 2014.

In an effort to resolve the problem of the drop in funds being collected, in 2016 the French government changed the allocation of the social charges from rental and capital income so that they were no longer paid to the social security body, but to the Old Age Solidarity Fund and the Social Debt Depreciation Fund. Therefore, claims could not be made on income earned in 2015 taxable in 2016 or on capital gains from 2016 onward. This was a bit of last minute shuffle to seemingly comply with the European judgment, however the legal grounds of this abrupt turnaround were questionable.

On 31st May 2018, the Nancy Administrative Court of Appeal held that even these social charges should not apply to those covered by another EU Member State social security scheme. This meant that the major part of the social charges (14.5%) should be refunded. Although this decision has been referred to the European Court for a ruling and has yet to be confirmed by the Conseil d’Etat, claims for 2016 and 2017 should be made now to avoid being time barred later (2015 is time barred as of 31st December 2018).

Whether or not it is because the French government is expecting the European Court of Justice to rule against them again, the Law on Social Security Financing of 2019 has now entered into force, stating that tax payers who do not rely on the French social security system for their healthcare, but on a healthcare system of another EU Member State, Iceland, Norway, Lichtenstein or Switzerland, are exempt from the CSG and CRDS on capital and rental income. Social charges in general have been reorganised so that, as of 1st January 2019 there are only the CSG and CRDS. However a new social charge has been introduced called the “Prélèvement Solidaire” at a rate of 7.5%, which means that the total amount is the same as last year at 17.2%. Under the Social Security Financing Law of 2019 those not reliant on the French State for health cover, as described above, only have to pay this 7.5% social charge.

An Order published on 7th February 2019 by the French parliament on the situation of Brits in France in case of a No Deal Brexit has stated that all current healthcare arrangements would be maintained for a period of 2 years following the Brexit. Although this is good news, it is subject to the UK reciprocating the same rights and guarantees.

Whilst no one knows what the final Brexit outcome may be, it would still be worth getting in touch with a financial adviser to review your investments and see how you can benefit from these new tax changes.

The PAYE system – and so it it begins!

By Katriona Murray-Platon - Topics: France, PAYE in France
This article is published on: 4th February 2019

04.02.19

Earlier last year I wrote about France’s plans to bring in a PAYE system as from 1st January 2019. Now that we are in January, we can see the effects of this new system. French pensioners and employees may have had the tax deducted from their salaries/pensions in December 2018 if the payment was made 1st January but for many people the effects of this new system will appear by the end of this month. Self-employed business owners, landlords and those with foreign sourced income will have to make monthly or quarterly tax payments. The difference with the previous system is that last year your quarterly or monthly payment was to pay towards your income tax for 2017 paid in 2018 whereas this year the payments are not for the 2018 tax but for the 2019 tax only.

If you go onto your account at impots.gouv.fr you can go into the menu for “gerer mon prélévement à la source”. This will show you your joint rate, if you and your partner chose one, or your individual rates. For those receiving French pensions and on French payroll, you will see a percentage of how much will be deducted from the income after social charges (so the “net imposable”). Going forward you will be able to see how much and when the tax was deducted. The applicable rate already takes into consideration the 10% tax abatement on salaries and pensions.

The main advantage of this new system is to allow the tax payer to inform the tax office of any changes to his personal situation such as a wedding, a divorce, a birth or death. In the “Gerer mon prélevement à la source page” you can declare any changes to your personal situation, change your tax rate or increase your tax payments. For those paying tax monthly or quarterly, you can change the frequency of your payments to monthly (if you paid quarterly) or to quarterly.

If your income has significantly decreased or the applicable rate is too high you can easily inform the tax office via the website. For French pensions and salaries, if the tax is reduced by more than 10% or 200 euros per year, the tax office will change your tax rate and inform your employer or pension provider within 1-2 months. The rate for income that is not taxed at source was calculated on the income declared for 2017. This amount, after the applicable abatement, was then divided into 12 monthly payments or 4 quarterly payments.

The annual tax declaration must still be completed between April and June. This declaration is to allow you to declare any income that is not taxed at source, any allowable expenses and any tax reductions or credits. The tax rate or amount will be adjusted once the tax return is completed in May 2019 and the tax calculation is carried out in September 2019.

Those receiving tax credits (home help, child care, etc) will have received an advance payment into their bank accounts in January. There will be an additional tax credit when the tax is calculated in September 2019 which will cancel some of the tax payable 2018 to avoid people paying 2018 and 2019 all in the same year.

Capital income is not taxed at source. They are subject to the set rate of 12.8% unless the marginal rate has been opted for. Assurance vie payments will be taxed according to the rules in place when the policy was set up. All assurance vies set up or topped up after 27th September 2017 and/or under 150,000 euros, may be taxed at the 35%, 15% or 7.5% rates as before or the marginal rate, in addition to the 17.2% social charges.

If you have recently arrived in France, there will be no tax to pay until you complete your first tax return between April and June of this year. You should make sure that you get your French tax forms early in April, do not expect them to be sent to you. You will not be able to complete your tax return online so you will have to file a paper return.

Whereas the French tax rules were complicated previously, even though this new system is designed to simplify things, it is going to take a while to get used to. For complete peace of mind, it is best to get in touch with a good financial adviser who will be able to carry out a free financial review and assist you in making the best tax efficient decisions.

The Gift of Giving

By Katriona Murray-Platon - Topics: France, Tax, United Kingdom
This article is published on: 19th October 2018

19.10.18

In my family, there are a lot of birthdays at the end of the year and before you know it Christmas is upon us. With only limited space for physical gifts like clothes or toys, sometimes cash gifts or contributions to the children’s savings plans are more than welcome! But how much can you give your children, grandchildren, nephews and nieces? As we will see, whilst the rules on official gifts and inheritance allowances are very clear, there seems to be much more flexibility on smaller gifts for special occasions.

Gifts from a UK resident to a French resident – UK tax applies
If you receive gifts from a UK resident, such gifts are generally subject to UK tax rules. However, if the recipient has lived in France for at least six of the ten tax years preceding the year in which the gift is received, French tax rules will apply. Inheritances are covered by the Double Tax Treaty between France and the UK but gifts are not. Inheritances are not taxable even if the recipient has been living in France for more than six years. If a double tax situation were to arise then the tax paid in the UK would be deducted from any tax payable in France. French tax is also payable if a UK resident gifts an asset that is situated in France.

A gift is defined as anything that has a value, such as money, property, possessions. If a person were to sell their house to a child, for less than its market value, then the difference in value would count as a gift.
Gifts to exempt beneficiaries are not subject to Inheritance Tax. These include:

  • Between husband, wife or civil partner, provided that they reside permanently in the UK
  • Registered UK charities (a list is available on the gov.uk website)
  • Some national organisations, such as universities, museums and the National Trust

HMRC also allows an annual exemption of £3,000 worth of gifts to people other than exempt beneficiaries each tax year (6 April to 5 April), without them being added to the value of the estate. Any unused annual exemptions may be carried forward to the next year, but only for one year.

Each tax year, a UK tax resident may also give:

  • Cash gifts for weddings or civil ceremonies of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
  • Normal gifts out of their income, for example Christmas or birthday presents, provided that they are able to maintain their standard of living after making the gift
  • Payments to help with another person’s living costs, such as an elderly relative or a child under 18
  • Gifts to charities and political parties

These exemptions may be cumulated, so a grandchild/nephew/niece could receive a gift for their wedding and their birthday in the same tax year. However, if the wedding or civil partnership is cancelled, the gift for this event will no longer be exempt from Inheritance Tax.

There is an unlimited amount of small gifts allowance of up to £250 per person during the tax year provided that the person making the gift hasn’t used up another exemption on the same person (such as the £3,000 annual exemption limit).

In the UK, Inheritance Tax is payable (at 40%) on gifts made in the 3 years before the donor’s death. Any gifts given between 3 to 7 years before death are taxed on a sliding scale known as ‘taper relief’. Gifts given more than 7 years before death are not counted towards the value of the estate. Inheritance tax will apply if the gift is more than £325,000 in the 7 years before the donor’s death.

Gifts from a French resident to another French resident or to a UK resident – French gift tax rules apply
In France, the Inheritance Tax allowances are not as generous as in the UK. The tax relief on gifts is the same as for inheritance tax and depends on the relationship between the donor and beneficiary. A parent may only give their child up to €100,000 tax free, a grandparent only €31,865 to a grandchild, brothers and sisters may receive €15,932, nephews and nieces € 7,967 and great-grandchildren €5,310.

There is no inheritance tax between married couples or those in a civil partnership, however, for gifts made during a person’s lifetime the maximum amount allowed is €80,724.
Gifts made to disabled persons, subject to certain conditions, have an additional exemption of €159,325 per person irrespective of the relationship between the donor and the disabled person. This exemption is in addition to the normal exemptions above.

These exemptions for gift tax (or ‘droits de donation’) may be used several times over during one’s lifetime, provided that there is a 15-year gap between each gift.
As in the UK, financial support given to a child/ex-spouse/dependent relative on a monthly/annual basis is not considered as a gift in French law, but rather as a family duty. Such support, or ‘pension alimentaire’ as it is called in French, is tax deductible for the donor but must be declared as income by the recipient.

A gift (called ‘don’ in French) may be a physical object, a house or property or intangible gifts like shares or intellectual property rights. If the gift is a house or property, a notary will be required, and he/she will make sure that the proper gift tax declarations are filed. The transfer of property must take place immediately and once given is irrevocable.

Cash gifts, (‘don manuel’ in French) – made by hand, cheque or bank transfer – are subject to different rules. A cash gift of €31,865, may be given to a child, grandchild, great-grandchild or, if there are none such, to nephews, nieces, or if the nephews and nieces have died to their children or representatives. The donor must, however, be less than 80 years old and the beneficiary must be over 18 years old on the day the gift is made. This exemption is also subject to the 15-year rule and is in addition to the Inheritance Tax allowances mentioned above.

The cash gift allowance and the normal gift allowances may be cumulated as long as they do not exceed the legal maximum amounts. So for example, provided that in all cases the donor is not yet 80 years old and the beneficiary is over 18; a mother or a father can give their child a total amount of €131,865; a grandparent can give an adult grandchild a total amount of €63 730 (€31,865 + €31,865); a great-grandparent can give an adult great-grandchild a total amount of €37,175 (€31,865 + €5,310) and an aunt or an uncle can give a nephew or niece a sum of €39,832 (€31,865 + €7,967).

Such cash gifts must be declared to the tax office the month after they are made. Cash gifts (above these exemptions) are taxable if they are discovered by the tax authorities during a routine enquiry by letter or during an official tax inspection. When the beneficiary declares the gift to the tax office of his/her own accord, they must pay the relevant amount of tax. If the value of the gift is over €15,000 it may be declared and any tax paid in the month after the donor’s death.

The French have another type of gift called ‘Présent d’usage’ which is a gift for normal ordinary life events like weddings, birthdays, graduations, baptisms etc. Such gifts are not considered taxable gifts provided that they are given on or around a special event/occasion and that they are not disproportionate given the level of income and assets of the donor.

There is no law which defines the exact amount of these gifts so each is considered on a case-by-case basis.

The Cour de Cassation ruled that a gift of €20,000 from a husband to his wife was a ‘present d’usage’ as it was given for her birthday and by way of a loan taken out by the husband. The monthly payments on the loan were less than 20% of his net income.

Such gifts are not subject to French gift tax and are not included in the donor’s estate.

So now that you are aware of the rules in both countries you may give or receive gifts knowing exactly what needs to be declared. However, the use of gift tax allowances as a tax planning strategy is something which should only be considered after taking proper advice from a qualified independent financial adviser specialised in cross-border matters.