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With strategic tax planning, French residents can reduce income tax, social charges, capital gains tax and wealth tax liability in France, while also unlocking other benefits.

As time goes by, we are learning more about what Brexit means for life in France, what actually changes and what doesn’t. The good news is that when it comes to taxation, nothing really changes for UK nationals who are resident in France. The tax regime remains as complex as ever, but at least we do not need to learn new regulations. 

Taxation is a domestic issue and France taxes all its residents the same way, regardless of nationality. Where residents own assets and earn income in another country, the relevant double taxation treaty determines where the income and assets should be declared and taxed. The UK/France treaty is agreed between the two countries, not at EU level, so the UK leaving the bloc does not make a difference here. As always, you need to understand how the treaty affects you and ensure you are paying tax in the right place. 

As we lead up to tax return time in France, this is the perfect time to review your tax planning to see what your liabilities were last year and establish how you can improve your tax situation going forward. Few people enjoy spending time on tax planning, but it is worth it for the benefits you can achieve for you and your family. 

Here are four of them:

1. A reduced tax bill for you 

Let’s start with the most obvious advantage – reducing your overall liability for income tax, social charges, capital gains tax and property wealth tax. 

Many people do not explore if there is a more tax-efficient way of holding their capital and assets and unknowingly end up paying more than they need have. This may include income tax on bank interest you are not even withdrawing, or capital gains tax when switching between investments.

Many expatriates are also caught out by not reviewing their arrangements for their new life in France. For example, income derived from ISAs and Premium Bonds prizes are tax-free in the UK, but are fully taxable in France. 

Meanwhile, you could be missing out on alternative structures available in France that can reduce your tax liability as well as providing other potential benefits, such as currency flexibility. 

It is also worth noting that, although Brexit does not in itself affect taxation, some member states do tax non-EU/EEA assets differently to local/EU assets. Here in France, very beneficial tax treatment can apply to life assurance/assurance vie but some of the advantages only apply to EU policies, so you could pay more tax in future.

2. Less taxation for your heirs

Of course, the less tax you pay in your lifetime, the more you have to either spend now or pass on to your heirs. 

But with some investment structures you may also be able to lower the succession tax liability for your heirs. Assurance-vie, for example, can be highly tax-efficient for estate planning purposes. Ideally you want a solution that will limit inheritance taxes while also providing tax-efficient income and investment growth throughout your lifetime, so explore your options.

3. More estate planning flexibility 

Strategic tax planning can also help make things easier for your family when you are gone. Many investment arrangements that provide tax efficiency also offer more estate planning flexibility and control. 

Some UK pensions are only transferable to your spouse on death, but when transferred to a Qualifying Recognised Overseas Pension Scheme (QROPS) or reinvested in a suitable tax-efficient structure for France, you could pass funds on to other chosen beneficiaries, often without the need to go through probate.

4. Maximising real returns 

In this global climate of economic uncertainty and prolonged ultra-low bank interest rates, effective tax planning also plays a part in helping returns outpace the cost of living. 

Ultimately, what counts when assessing the value of investments are ‘real’ returns – after tax, expenses and inflation are taken into account. Property, for example, is often lauded for producing relatively high returns over the long term, but with stamp duty, local rates, capital gains and wealth tax applied, the tax burden can be large compared to other assets. 

With investments, the starting point should always be making sure your portfolio is well diversified and designed to suit your situation, needs, goals, time horizon and risk tolerance. But without suitable tax planning, returns can be diminished by taxes that could have been avoided or significantly reduced, so this is important too. 

How to get the best results

It is easy to get DIY tax planning wrong, especially with regulatory goalposts changing frequently. Expatriates have the added complication of having to deal with the tax rules of more than one country, at a time when global tax scrutiny is at its highest. Getting it wrong could lead to an unwelcome and unexpected tax bill not to mention the stress of sorting it out. 

Tax planning should not be done in isolation or as an afterthought – make it a fundamental part of your investment, pensions, estate planning and overall wealth management strategic plan. Schedule regular reviews so you can adjust your arrangements to keep up with any life changes or tax reforms that affect you, including new opportunities.

For the best results, talk to an adviser with in-depth understanding of cross-border taxation, including how the French tax regime interacts with UK rules. As well as offering peace of mind that your tax and wider financial planning is compliant in France, they can ensure it meets your income needs and goals in the most tax-efficient way today, without burdening your family with unnecessary tax headaches in the future. 

Arrange a call with 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 take personalised advice.