If you’re moving to France, make sure you understand how French income tax, wealth tax, inheritance tax and succession law works, and how you could take advantage of opportunities available for you and your heirs.

Are you a UK national hoping to secure residence in France before the transition period ends? Or have you recently started your new life here? Either way, it is important to prepare for French taxation and adjust your wealth management accordingly for living in France

Generally, once you arrive in France to live here indefinitely, you become tax resident the following day. You are deemed resident for tax purposes if your main home is in France, or it is your principal place of abode (you spend 183 days here a year), or your principal activity or centre of economic interests is in France. 

Research all the various taxes you will be exposed to in France, then establish where your assets stand in consideration of those taxes and what you can do to improve your tax position. 

Taxation in France

French income taxes

Income tax rates for 2020 income range from 11% for income over €10,064 to 45% for income over €157,807. An additional 3% or 4% tax is levied on income over €250,000 and €500,000 respectively, with higher thresholds for families.  

Social charges are additionally payable on income, at 9.7% for employment income; 9.1% for pension income and 17.2% for investment income.

Retirees with Form S1 escape social charges on pensions and pay a lower 7.5% rate on investment income – however, we do not yet know what the situation will be for those who take up residence, or are only eligible for the S1, from January 2021.

Investment income benefits from a special fixed rate of 30%, which includes both income tax and social charges.   

French wealth tax

This used to apply to the entire wealth of a household, but is now only levied on real estate assets. This annual tax affects households with real estate wealth exceeding €1,300,000. The first €800,000 is tax free, then rates range from 0.5% to 1.5%.

French succession tax

French inheritance tax is charged on each beneficiary, with rates and allowances varying considerably according to who the beneficiary is.

Inheritances between spouses/PACS partners are tax free (but not gifts) and children have lower rates and higher allowances than more distant relations. You need to be particularly careful where stepchildren are involved as their tax-free allowance is very low and the tax rate is generally 60%.  

This may seem daunting, but there are usually steps you can take to improve your tax position in France, particularly for investment capital and inheritances, sometimes considerably so. 

Download our guide to taxes in France

Estate planning for France

In France you need to give estate planning almost as much importance as tax planning. Even if you do not expect to live here forever, life is unpredictable. If you are resident in France when you die, your heirs will be impacted by French succession law and tax.

Forced heirship in France

French succession law imposes forced heirship. Your children are ‘protected heirs’ so you cannot leave your entire estate to your spouse.

The European ‘Brussels IV’ succession regulations do allow you to opt for the law of your country of nationality to apply instead of French law (provided you organise this in advance through your will), but take specialist advice first to understand all the pros and cons; it may not be the best option for you.  

If you have not yet bought property, familiarise yourself with succession law first. There are various ways of owning property in France, which can have succession tax and law implications. Establish which option would best suit your family situation.  

See more about French succession law

Tax on UK pensions in France

Retirees should also review their pension funds and the options now available to them, such as whether you could benefit from moving your pension to a Qualifying Recognised Overseas Pension Scheme. If you are considering a QROPS, note that the UK could start imposing the 25% ‘overseas transfer charge’ once it sheds its EU obligations at the end of the year.   

Read 'Is time running out for tax-free pension transfers?'

Alternatively, you could potentially take your UK pension fund as a lump sum and possibly pay just 7.5% tax in France under certain circumstances (plus 9.1% social charges unless you escape them as noted above). You could then re-invest the capital into tax-efficient arrangements. 

With something as important as your pension, it is vital to take regulated professional advice tailored for your situation.

Overall planning for France

Your UK tax-efficient vehicles may not be tax-efficient in France, so review your tax planning and how you hold assets. There are arrangements available in France that can prove very advantageous tax-wise, for yourself and your heirs. They can also provide succession planning benefits. 

While preparing for French taxation is a major part of relocating here, to create a successful wealth management strategy look at the whole picture, including estate planning, pensions, savings and investments etc. The way you hold investments, for example, can make a big difference to how they are taxed and how easily they can be passed to your heirs. 

Planning a tax-efficient move to France involves both French and UK taxation, so talk to a specialist cross-border adviser who is familiar with the interaction between both regimes and regularly advises on effective planning strategies.

Contact us to discuss your plans

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.