Could You Save Tax As A Resident Of France?

In all of the years that Blevins Franks have been giving tax and wealth management advice to expatriates around the globe, there is a common theme which keeps repeating itself ? that of people mak

In all of the years that Blevins Franks have been giving tax and wealth management advice to expatriates around the globe, there is a common theme which keeps repeating itself ? that of people making decisions about where to become resident based on their perception of the local tax rules rather than the actual facts. France is a perfect example of this. Since it is perceived to be a high tax jurisdiction many British people limit their time in France to remain UK resident, even though they would prefer to live permanently in France, or they simply do not declare themselves for tax in France. Others head to Monaco instead.

On first inspection France does look expensive from a tax perspective. Not only is there income and capital gains tax to contend with, but also social charges, wealth tax and succession tax. In addition French succession law limits who is able to benefit from your estate on death.

Of course there are plenty of people who do move to France anyway and they usually just accept the tax regulations and can end up with quite large tax bills.

What many people often do not realise, however, is that they may be able to take advantage of French tax compliant opportunities to protect their assets from the various French taxes, so much so that they could end up paying less tax in France than in countries like the UK.

For example, we?ve recently had UK clients who could save around ?10,000 in tax just by becoming resident in France, and the savings could possibly increase with tax planning arrangements. Of course how much tax you save will depend on what assets you own and your annual income, but this example shows that it?s certainly worth looking into.

There are certain investments available which can provide substantial tax savings for French residents, in income and succession taxes, and which may also help reduce wealth tax and avoid UK inheritance tax if necessary. There is talk that wealth tax could be abolished, but even if it is not, it is possible to mitigate this tax and new arrivals in France are exempt for the first five years.

These tax planning arrangements can also help you structure your assets so that you are free to leave them according wishes rather than those of the French government.

As a British expatriate living in France you may also be able to reduce tax on your deferred UK pensions or pensions in drawdown.

As with any wealth and estate planning, the starting point is to understand what the rules are and then establish if there are ways to minimise the personal impact of them and if you can use the rules to your benefit. It is important to take professional advice from a firm like Blevins Franks to ensure you are aware of all tax rules and the available mitigation opportunities, and also that you get your tax and estate planning right.

By Bill Blevins, Managing Director, Blevins Franks

10th February 2011