Are you worried about the tax implications of becoming resident in France? Setting up tax residency may not be as daunting as you think, and France is often a more favourable tax jurisdiction than you may expect.
It’s tax return month here in France, a time of year when we often moan about French taxation. So here I intend to counter that by highlighting some benefits of being living in France, including being a tax resident.
Some British readers will own second homes in France, spending as much time as they can here each year. They’ve embraced the French lifestyle and who can blame them? It offers access to a rich cultural heritage, universal healthcare and a high standard of living. The French way of life promotes work/life balance, education is highly valued and of course, the culinary scene is world-renowned. The country’s geography provides diverse landscapes for living, so there is somewhere to suit almost everyone in France.
So many of the British owners of maisons secondaires we meet would like to spend much more time there, but worry about taxes being too high or that it would be too complicated to change to a new tax system. The reality, though, is quite different – France is often a favourable tax jurisdiction, even better in some cases than the UK. It depends on how your personal situation and objectives, and how you plan and organise your affairs.
Why is France an interesting tax jurisdiction?
Establishing French tax residency can offer advantages for wealthy individuals contemplating moving here. France taxes residents on a worldwide basis, as many countries do, but it comes with nuances that can be advantageous.
One key benefit is the potential for tax optimisation through France’s tax treaties. The France/UK double taxation agreement helps prevent double taxation on income, allowing for a strategic tax planning approach across both countries.
France offers a family quotient system for income tax – parts familiales – which could be beneficial for couples, families or those with dependents. It divides the household’s total income according to the number of persons, potentially lowering the effective tax rate. This makes a significant difference where one family member has a much higher income than the others.
While France does impose a wealth tax, it can be less of an issue than you might expect. Unlike countries that tax all forms of wealth, France only targets real estate assets with a threshold of €1.3 million. This provides relief for those whose wealth is diversified beyond property. Additionally, new residents can enjoy a five-year wealth tax exemption for foreign properties, which could be appealing for Britons with a substantial UK property holding.
Succession tax rates in France look high at face value, but few estates in France pay this level of tax thanks to strategic planning that can allow families to claim multiple tax-free allowances and bring the taxable element within the lower tax bands. And there are various things that can be done in terms of asset planning to potentially reduce succession tax right down.
However, these benefits come with the complexity of navigating French tax laws, which requires careful planning. Guidance from wealth management advisers experienced with both tax systems, their compliance regulations and maximising benefits will prove invaluable.
Why choose France over lower tax countries?
Of course, sometimes the answer is that many people simply want to live in France. They embrace this majestic country and the lifestyle it offers, and picture themselves living very happily there. After all, for most people the top priorities are lifestyle and security.
But also, from a fiscal perspective, in certain cases France can be more interesting than many so-called tax havens.
For example, many British working expatriates in countries like the United Arab Emirates also have a second home in countries like France. When they reach retirement, they have to decide between remaining resident in the UAE and just visiting their French house often without breaching visa and tax residence rules, or moving to France full time, or returning to the UK.
They are used to living in a country offering many tax benefits, such as, in the case of the UAE, no tax on income or capital gains. Once you reach the retirement stage of your life though, you think more about estate planning and arranging a straightforward, tax-efficient transfer of wealth to your family. While the UK has a tax treaty with the UAE, it does not include inheritance tax, which may bring your entire global estate within the scope of UK inheritance tax, depending on your circumstances. France, however, is one of the few countries to have an inheritance tax treaty with the UK. If you move to France, with careful strategic planning you may be able to significantly reduce your overall inheritance tax liabilities.
There are other tax savings. Once your French holiday home becomes your main home, it’s no longer subject to taxe d’habitation. You also benefit from a reduction on its value for wealth tax, which may take you out of the wealth tax net. And while your income isn’t quite tax free, you may be able to structure your pensions and investments in such a way that withdrawals are regarded mostly as return of capital, resulting in a low effective tax rate.
To put it simply, France may be a much more tax friendly jurisdiction than you expect, especially for retired people. Rather than letting tax dictate where you live, explore the local tax regime to establish opportunities for effective and compliant tax planning.
Is establishing residence in France difficult?
Moving to the French system might seem daunting due to its administrative processes, but there are compelling reasons not to be deterred by this aspect.
Firstly, France has streamlined many bureaucratic procedures in recent years, particularly for non-EU citizens, making relocation smoother than you might expect. New online platforms for visa applications simplifies what was traditionally a paper heavy process. You can handle much of the paperwork from your home country, reducing the stress of dealing with bureaucracy upon arriving in France.
Secondly, once in France, numerous support systems are in place to assist newcomers. There are dedicated services for foreign nationals where you can get help with understanding and navigating administrative procedures. Many town halls or mairies have staff who speak English, or you can often find English speaking assistance at local prefectures.
Moreover, the French administrative system, while sometimes seen as complex, operates with a certain predictability. Once you understand the steps required for tasks like registering for Social Security, opening a bank account, or getting a carte de séjour residence permit, the process becomes routine. Each step usually follows a clear protocol, making it less overwhelming after the initial adjustment.
Of course, community support plays a significant role. Expat groups offer invaluable advice, and there are English or English-speaking specialists throughout France to guide you through everything from property purchase, residence visas and relocation, to effective tax and wealth management in France.
In summary, don’t let taxation and bureaucracy put you off becoming resident in France. The benefits of living there make it all worth it, and with strategic financial planning in place you may be pleasantly surprised by your tax situation in France.
Whether you are already planning to move to France, or still wavering because of taxation, get in touch with Blevins Franks for personalised advice and guidance. Our specialist will evaluate your situation to establish the tax implications of becoming resident in France and recommend solutions to improve your liabilities. Our strategic financial plans cover tax planning, succession, investing and pensions, and are highly personalised around your family situation and aims.
Contact Blevins Franks today
