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France Tax Guide
Technical Guides • France Tax Guide
France Tax Guide
Do you know about the tax implications of moving to France? This guide looks at many issues facing people moving from the UK to France to raise awareness of things that may affect you.
This in-depth guide includes
- What determines your tax residency status?
- What are the tax implications on investments, pensions, and rental income?
- How does capital gains tax and inheritance tax work in your situation?
- Is a French Will necessary?
- France's social charges & wealth tax
FAQs
Pension income from UK funds is typically subject to taxation only in France. It is taxed at the income tax scale rates after a 10% deduction, up to a maximum of €4,123 per couple. The current income tax rates range from 11% for income over €10,778 to 45% for income over €168,994. Additionally, France applies social charges at a rate of 9.1% (reduced to 7.4% for low pension income), although individuals holding Form S1 are exempt from these charges.
On the other hand, income derived from UK government service pensions remains taxable in the UK and not in France. However, you are still required to include it on your French income tax return, but you receive a credit equal to the French tax and social charges incurred.
Many British individuals relocating to France often encounter a common tax pitfall. Under UK rules, you are allowed to withdraw a tax-free “pension commencement lump sum” of 25%. However, taking this lump sum after becoming a resident in France becomes subject to French income tax, which can reach up to 45%, along with potential social charges. Being aware of this potential tax liability is crucial if you have not yet left the UK.
On the other hand, if you are contemplating taking your entire pension as a lump sum, there are certain circumstances where you may qualify for a fixed 7.5% income tax rate in France. This presents opportunities to reinvest the capital into a tax-efficient arrangement within France and potentially reduce your overall tax burden. Nonetheless, it is essential to carefully assess whether such a course of action would be suitable and secure for your specific situation.
Social charges in France are levied in addition to income tax, and they now generate more revenue than income tax. Although they are separate from social security contributions, they play a role in funding France’s healthcare and social services.
For investment income, there are two rates of social charges: 17.2% and 7.5%. The standard rate is 17.2%. However, if you possess an S1 form or are covered by the healthcare system of another EU/EEA country, the charges on investment and property income are reduced to 7.5%. In other words, you only pay the 7.5% Prélèvement de Solidarité charge. This reduced rate continues to apply to UK nationals even after Brexit.
All the things you need to know
Our tax advisers created this guide. With close to 4,000 expatriate and cross-border investor clients, we understand the pains of having assets split worldwide and have vast experience advising clients in this scenario. We have put together this easy-to-follow guide to help those investors taking the limited company route to help structure their finances.
This guide was last updated in June 2023.
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