Understanding ‘lawful’ and ‘tax’ residence in France

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Understanding ‘lawful’ and ‘tax’ residence in France

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

With the Brexit clock still ticking, it’s crucial for UK nationals living in France to know the difference between ‘lawful’ and ‘tax’ residence.

With the Brexit clock still ticking, UK nationals who want to live in France beyond 2020 need to meet their obligations for both ‘lawful’ and ‘tax’ residence. 

Despite the unprecedented situation we’re in, the Brexit transition period is still due to end on 31 December 2020. Where possible, UK expatriates should take the necessary steps to cement their residence in France before the rules change in 2021.  

There are, however, two different concepts of residence to be aware of:

  • Lawful residence – your rights, as a national of one country, to live and work in another.
  • Tax residence – the country which has taxing rights over your worldwide income, gains and wealth. 

Lawful residence in France

While we still do not know what the UK’s new relationship with the EU will look like post-Brexit, the transition period provides some certainty for the rest of this year. 

During the transition period, UK nationals have the freedom to move to live in France, as they did before Brexit. Those who are lawfully settled in France before the end of 2020 can lock in citizens’ rights under the terms of the Withdrawal Agreement. These benefits are protected for as long as you are resident in France and include access to healthcare, social security, education and employment opportunities. UK retirees will continue to receive yearly cost-of-living increases to their UK State Pension payments.  In France, however, British expatriates no longer have the right to vote or stand in local elections; that ended on 31 January 2020.

Be aware that you will lose these rights if you leave France for more than five years and if you move from France to another EU country, you will have to apply for residence as a non-EU citizen.

Whether you are already living in France or planning to relocate later this year, you will need to apply for the official “carte de séjour” residence card. Currently, the deadline for applications is 30 June 2021 (this may obviously change due to the unforseen travel lockdown), but you must have arrived in 2020 (i.e. during the transition period) and presumably be able to demonstrate that. If you already have permanent residence in France, you will need to swap your old card for the new one. The French government is launching a new website (now scheduled for October 2020) for residency card applications for UK nationals.

There are currently no guarantees for UK nationals arriving after 2020. While we are confident France will continue welcoming British expatriates, we do not yet know what the application rules will be or what rights residence will give you. 

It is worth noting that under current rules for non-EU/EEA nationals, each individual must demonstrate a minimum income to qualify for residence in an EU state, equivalent to the national minimum wage. This could prove difficult for retirees, although there are potential ways to restructure assets to meet the requirements. 

As things stand, from 2021, if you do not have a residence card you will only be permitted to spend 90 days in France in any 180-day period. 

Tax residence in France

It is possible to have a residence card for one country but be tax resident in another. Unlike legal residence you do not have a choice; you either are, or are not, a tax resident under the domestic rules.  

While your focus may be on securing residence in France as soon as possible because of Brexit, you still need to spend some time understanding what your tax liabilities will be in France – careful advance planning could help you save considerable amounts of tax. 

French tax residents are liable to pay tax on worldwide income, gains and real estate wealth. It is your responsibility to make yourself known to the French tax authorities and submit annual tax returns.   

Note that registering for tax and submitting your self-assessment tax return for the year you become resident would help prove your legal residence in France.

What are the French tax residence rules?

Under the Code Général des Impôts, individuals are deemed to be tax resident in France if at least one of the following tests is fulfilled:

  1. France is your main residence or home – your ‘foyer’. This is the rule the French authorities rely on most. Your foyer is the place where your close family (spouse/dependent children) habitually live or, for a single people with no children, where most of your personal life is centred. Your foyer can be in France even if you spend much of your time out of the country. 
  2. France is your principal place of abode – your ‘lieu séjour principal’. This usually means you spend more than 183 days in France in a calendar year but may also apply if you spend more days here than any other single country.
  3. Your principal activity is in France – your occupation is in France or your main income arises here.
  4. France is the ‘centre of your economic interests’ – where your most substantial assets are based, your assets are administrated or your business affairs are, or where you draw a larger part of your income.    

You become French tax resident from the day of arrival. France uses the ‘split-year’ approach, so you can be non-resident for the earlier part of a year and resident for the latter part.  

British expatriates should also understand the UK’s ‘Statutory Residence Test’. If you have recently arrived or spend time in both countries/retain ties with the UK, you could be deemed resident in the UK for tax purposes without realising it. If you meet the domestic tax residency rules of both France and the UK, tie-breaker rules from the double tax treaty determine where you pay taxes. 

Did you spend lockdown in France?

In today’s new Brexit world, specialist cross-border advice is more important than ever, ideally holistic advice covering a range of issues, from residence (both types), tax planning, investing and estate planning. It is important to ensure that the company and advisers you deal with are fully Brexit-ready and can advise you in France beyond 2020. Not all advisers are in a position to do so, nor advise on complex areas like overseas pension transfers considerations (such as Qualifying Recognised Overseas Pension Schemes – QROPS) going forward. So choose your adviser carefully to ensure you have all aspects of living in France covered. 

Contact a France-based adviser

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.