Monday, 8 January 2018

A new year resolution to review your financial planning for France

The New Year is a perfect time to review your financial planning for France. Is it up to date? There are various elements you should consider, from investments, to pensions, to tax and estate planning.

Here we are, at the start of another year. For many it is a time of looking forward, to what we expect 2018 to bring and how we can make it a happy and successful year. From a financial planning perspective, this is a good time to review your existing arrangements and establish if you need to make changes for 2018 and beyond.

We recommend you do this around once a year; particularly to look at your investments, but also your tax and estate planning and pensions. If you have not done this in a while, the New Year is a good prompt to do so.

Tax planning

With tax planning you need to consider any rate or regulation changes over the last year and whether they mean you need to make adjustments. And of course in France we have two significant changes starting from January 2018:

  1. Wealth tax as we knew it has been repealed and replaced by a new version. The rates and rules are similar but it now only applies to real estate (savings and investments are exempt).
  2. Investment income is now taxed at a fixed rate of 30%, including social charges (though smaller policies can still apply the scale rates of income tax).
While these are both tax cuts, it is worth looking at your tax planning again to ensure you can take full advantage of these reforms.

If you are thinking of investing in property, first look at the tax implications and compare how much tax you would pay compared to investing in securities like shares and bonds. Consider wealth tax, capital gains tax and tax on income (rental income does not benefit from the 30% fixed rate).

If you are new to France it is even more important to review your tax planning, since the opportunities for tax mitigation are very different from the UK or elsewhere. What was tax efficient in the UK is unlikely to be so in France. You may need to make changes to secure an appropriate strategy that reduces your liabilities to the legal minimum and preserves your wealth for you and your family.

Estate planning

There have not been any major changes since the EU succession regulation “Brussels IV” came into effect in 2015. So estate planning done over the last couple of years should still be effective. But if you have not established a thorough estate plan since moving to France, or in recent years, do so now, before it is suddenly too late.

The first step is to establish your goals. Who do you wish to benefit from your estate? Do you want them to have control over the money? What impact will French succession and UK inheritance taxes have? Can you avoid probate on any assets? Should you choose French succession law or UK succession law? Then take specialist advice to put structures in place to achieve your goals – cross border succession planning is complex, particularly for wealthier families and/or those with children from previous relationships. Make sure you get it right.

Savings and investments

Are you certain your investments, and the mix of them, is suitable for your new life in France – for your circumstances, needs, time horizon and risk tolerance? This is such an important element of protecting and growing your wealth, yet many people do not have a strategic investment plan in place, or have neglected one set up years ago.

You first of all should establish your risk appetite, then make sure that the mix of investment assets in your portfolio is in line with it. This will involve a careful blend of asset types, companies, countries, sectors etc, which should also be structured to suit your specific objectives – for example, is income or growth more important for you?

Even if you have a carefully structured portfolio, it is essential to review it every year. As asset prices rise and fall your portfolio could become unbalanced and carry more risk than you previously intended. You may need to make adjustments to re-balance it.


Today’s pension landscape is quite different from a few years ago, so spend a little time to establish the best course of action for your pension funds.

The UK’s “pension freedoms” provide you with many ways to access your funds. This creates some attractive opportunities, but great care must be taken to establish the best course of action for you – do not risk your long-term financial security.

If you have a final salary pension you may be able to take advantage of higher transfer values being offered by some providers. While this could provide new opportunities, you should carefully weigh this up against giving up a guaranteed pension for life and take regulated advice to avoid pension scams.

Remember that UK pension benefits (excluding the state pension) totalling over £1 million breach the lifetime allowance and anything over this triggers 55% UK taxation when taken as cash or 25% for income and transfers. Consider ‘protection’ options or transferring to minimise tax penalties.

You need to consider the French tax implications of all your options, but the local tax regime can provide advantages, particularly if you can take all your pension as a cash lump sum at once. In this case you may be able to pay just 7.5% tax, plus 9.1% social charges (2018 rate). You escape social charges if you have not yet registered for healthcare or have Form S1.

Reviewing your wealth management arrangement once a year should prove profitable and provide peace of mind. You should look at all the above areas together, as changes in one could affect the other, and establish holistic solutions that work for your personal situation.

Our France advisers would be happy to review your current tax and wealth management and discuss strategies to improve and protect your wealth for yourself and your heirs.

Article courtesy of Blevins Franks - 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 are advised to seek personalised advice.

Sunday, 17 December 2017

Expatriates’ rights safeguarded with Brexit breakthrough

A landmark agreement has been reached in Brexit talks which has cemented citizens’ rights on both sides.

Prime Minister Theresa May and European Commission President Jean-Claude Juncker presented a joint “progress report” on 8th December outlining the key areas of agreement. Focusing on the three priority issues – citizens’ rights, the Irish border and financial settlement – it paves the way for the EU27 to unlock the next phase of negotiations.

The key for UK nationals living abroad is that it preserves the rights of residence locally in EU countries. However, this only applies for existing residents before Brexit, so if you wish to remain but have not yet applied for residency, it is important that you do so to secure these rights.

Where do we now stand with citizens’ rights and the other key Brexit issues given the latest agreement?

The right to remain

Both sides have formally agreed to maintain existing rights for EU nationals settled in the UK and Britons in the EU. “Today, we bring back the certainty” said Juncker. For Britons resident in the EU today – or who gain residency before Brexit takes place – this means that your right to remain is guaranteed. This also extends to partners and direct family members, even after the Brexit date. You would, however, lose your permanent residency status after a period of five consecutive years abroad. Britain’s request for onward freedom of movement – enabling Britons to freely move between EU countries – has been deferred to the second round of talks.

While the cut-off point to lock-in the right to remain is set for the date Britain leaves the EU on 29th March 2019, it is unclear if any transition period could extend this further.

So if you are spending considerable time in an EU country such as Portugal, France, Spain, Cyprus or Malta and would like the freedom to continue doing so post-Brexit, consider taking steps to secure your residency now. Similarly, if you are thinking about relocating, now is the time to take action, before the rules change. Beyond Brexit, the precise requirements, length of time and expense required to acquire permanent residency are uncertain.

Access to healthcare

The UK and the EU27 have committed to continue existing healthcare entitlements after Brexit. This means that:

Expatriate healthcare costs will continue to be fully or partially reimbursed by the NHS

The Form S1 system will carry on providing free cover for British pensioners and those receiving certain long-term benefits

Holders of the European Health Insurance Card (EHIC) remain eligible for free or reduced healthcare when visiting another EU country

While this is reassuring, you may prefer to secure peace of mind by lining up comprehensive private health insurance for your family.

Legal protection

A previous sticking point was how citizens’ rights are enforced by law. As well as freedom of movement and residence, rights include access to healthcare, education and social security benefits, and also employment issues like working conditions.

While the EU27 maintained that citizens’ rights must be protected outside national jurisdictions through the European Court of Justice (ECJ), Theresa May insisted on sovereignty for British courts.

Mrs May still demands that EU citizens living in the UK have their rights “enshrined in UK law and enforced by British courts”. However, she has now agreed to allow an eight-year oversight role for the ECJ up to March 2027 where cases are unclear. This compromise was a significant factor in securing agreement with the EU27. For UK expatriates, it represents more scope to invoke British legal protection while living in the EU.

The divorce bill

Initially, Prime Minister Theresa May offered to pay around €20 billion up to 2020, falling short of the EU’s expectations. However, in late November, she agreed to fully honour Britain’s financial commitments – estimated at around €40-60 billion – to secure the go-ahead from the EU27.

The Irish border

The Prime Minister has now presented a solution to satisfy the key players regarding this problematic issue. She promised no hard border between Northern Ireland and the Republic while confirming that the whole of the UK, including Northern Ireland, will leave the customs union.

What happens next?

At the EU summit on 14th-15th December, the EU27 are expected to formally agree that “sufficient progress” has been made to trigger the next phase of Brexit talks. EU chief negotiator Michel Barnier indicated that next steps would be to discuss a transition period before tackling the future trade relationship. But there is still much to agree.

If you are resident in the EU before Brexit, you and your family have the right to stay permanently and continuing accessing the healthcare benefits you do today. Your tax treatment should also stay the same and, as things stand, you can still transfer your UK pensions without penalties.

However, you could benefit from reviewing your financial planning and exploring your options before any changes take place. A locally-based adviser with cross-border expertise can help you secure financial peace of mind and prepare for Brexit developments that might affect you.

This article has kindly be reproduced by courtesy of Blevins Franks. The points above are based on the Joint UK-EU Joint report from the negotiators of the European Union and the United Kingdom Government on progress during phase 1 of negotiations under Article 50 TEU on the United Kingdom’s orderly withdrawal from the European Union to be put to the meeting of the European Council (Article 50) of 14-15 December 2017. Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this information, which is general in nature and not specific to your circumstances. All advice received from any Blevins Franks firm is personalised and provided in writing. This document, however, should not be construed as providing any personalised taxation and / or investment advice. All information contained in this document is based on Blevins Franks’ understanding of legislation which may change in the future.

Monday, 27 November 2017

Keeping up to date

If you are thinking about moving to France, or are indeed already owning / living in France, at time it can be quite a challenge keeping up to speed with all of the changes that are happening.

Via our Library pages we regularly advise our clients about topical subjects that can impact significantly upon their situation in France.

Here is a flavour of what is already in this section, or about to be added :

Delaying registering for healthcare in France could save tax on your pension 

If you are planning to take your pension as cash, avoiding social charges could make a considerable saving. One of the key concerns for expatriates arriving in a new country is healthcare. While we hope we will not need to use it anytime soon, we need the peace of mind of knowing that we, and our families, have access to healthcare and are covered financially for it. For many British expatriates, therefore, registering with the French system is high on their priority list. Be aware, though, that you should consider the options for your pension fund before you register for healthcare.

Right place, wrong taxes (France) 

UK expatriates living in France need to get their tax planning right and make sure they are paying the right taxes in the right country – getting it wrong could prove costly.

Imagine this scenario: you are a British expatriate, living in France and enjoying the lifestyle you have dreamed about. Then you receive a letter from your local tax office claiming you owe them thousands of euros in unpaid taxes, interest and penalties.

What happens if you sell your French home after leaving France? 

The Constitutional Court ruled that the main home capital gains tax and social charges exemption is only available to French residents Capital gains on the sale of a property in France are liable to both French tax and social charges. Your home is exempt from both, provided it is your main home at the time of sale.

There is a 12-month ‘grace period’, but the Constitutional Court has just ruled that this does not apply if you have left France.

Three changes to UK domicile rules that could cost you money 

Proposed changes to the UK domicile regime have come into effect after being put on hold over the summer – and could prove costly for expatriates. Having ‘paused’ their Finance Bill during the upheaval of the snap general election, the government is now passing it through parliament as law, with changes backdated to take effect from 6 April 2017.

Whether you are planning to move to another country or currently live abroad and thinking about returning to the UK – even temporarily – these changes could affect your tax liabilities.

Make sure you understand what the new rules mean for you and your family.

Monday, 2 October 2017

Major tax reforms in France

A new 30% flat tax rate will be introduced for investment income from January 2018, and a new version of wealth tax will only apply to real estate, lowering tax bills for many expatriates in France.

As part of his election campaign, President Emmanuel Macron promised various tax reforms, particularly on how investment assets and income are taxed. The aim is to encourage people to save more by simplifying taxation on financial income as well as aid business growth.

The draft French budget for 2018 was presented to Parliament on 27th September 2017. A balancing act of tax and spending cuts, it includes the promised tax reforms. The budget will now work its way through parliament before being approved at the end of the year, so changes are possible.

The main measure affecting expatriates in France are summarised below.

Flat tax on investment income

Investment income is currently taxed at the scale rates of income tax, but from 1st January 2018 it will become liable to one fixed rate of 30%.

This 30% rate includes both income tax (12.8%) and social charges (17.2%).

It will only apply to investment policies over €150,000 (per person, so €300,000 for a joint policy), whether in an assurance-vie or not. Lower income households can continue to opt for the progressive income tax rates, so that they do not have to pay more tax under new system.

Note that for assurance-vie, the new system will apply to all policies set up on or after 27th September 2017, but the 30% flat rate system will not start to be applied to withdrawals until 1st January 2018. This is because the French Constitution states that 70 days have to elapse between the budget being proposed to parliament and it being approved.

While most of the reforms were expected, this early date for assurance-vie was a surprise. However, the flat rate can actually be more beneficial for individuals with a higher marginal rate of tax.

If your assurance-vie policy was set up before 27th September, the old fixed rate system is still available, as is the ability to elect to use the scaled tax system.

Policies held for more than eight years will continue to benefit from the €4,600 Prélévement Libératoire allowance (€9,200 for married couples / PACS partners).

Your assurance-vie policy will no longer be subject to wealth tax (see below).

There are no changes to the succession tax treatment of assurance-vie.

Wealth tax

From 1st January 2018, wealth tax will be abolished and a new real estate tax will be applicable. Savings and investments, including assurance-vie policies, will be exempt from this tax.

If you own or are thinking of buying investment property, it may be worth considering moving the funds into capital investments instead.

The current threshold of €1,300,000 will stay in place; the wealth tax scaled rates will apply to property, and main homes will still enjoy the 30% abatement. The 75% limit will also continue to apply.

Social charges

Social charge for all forms of income are increasing by 1.7%, as follows:

- Employment/self-employment income from 8% to 9.7%
- Pension income from 7.4% to 9.1%
- Investment income (including rental income) from to 15.5% 17.2%

Taxe d’habitation

This property tax, currently paid by most French households, will only apply to the 20% with the highest incomes.

Not yet approved

Remember that all these reforms still need to be debated and approved by parliament, and so changes are possible.

Article provided by courtesy of Blevins Franks - Please do not hesitate to contact us if you would like to discuss how these reforms affect you personally or for tax planning advice. 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; an individual is advised to seek personalised advice.

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