Tax Planning

Now could be the time to make the most of tax planning in France

We are now more than two months after the end of the Brexit transition period.

Over time, we will learn more about what it means for our lives in France, what is actually changing and what is not.

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The good news is that nothing is really changing when it comes to taxation for UK nationals resident in France. The tax system is still complex, but at least we don’t need to learn any new rules.

Taxation is a domestic matter and France taxes all residents the same way regardless of nationality.

If residents own assets and earn income in another country, the relevant double taxation treaty determines where income and assets should be declared and taxed.

The treaty between Great Britain and France is agreed between the two countries and not at EU level, so that Great Britain’s exit from the bloc makes no difference here.

As always, you need to understand how the contract will affect you and make sure that you are paying taxes in the right place.

As we are about to file a tax return in France, this is the perfect opportunity to review your tax planning to see how much your debt was last year and how you can improve your tax situation in the future.

Few people enjoy spending time doing tax planning, but it pays off for the benefits you can get for yourself and your family. For example, here are four of them:

1. A reduced tax bill for you

Let’s start with the most obvious benefit – reducing your total liability for income tax, social security contributions, capital gains tax, and wealth tax.

Many people fail to investigate whether there is a more tax efficient way to hold their capital and assets and unknowingly pay more than necessary.

This could include income tax on bank interest that you don’t even withdraw, or capital gains tax on switching between investments. Many expatriates are also surprised when they fail to review their new life arrangements in France. For example, income from ISAs and premium bond pricing is tax-free in the UK but fully taxable in France.

In the meantime, you could be missing out on alternative structures in France that will reduce your tax liability and offer other potential benefits such as: B. Currency flexibility.

It is also worth noting that while I initially said Brexit will not have a material impact on taxation, some Member States, according to their domestic rules, tax assets outside the EU / EEA differently than on-site / EU assets. Here in France very beneficial tax treatment can apply to life insurance, but some of the benefits apply only to EU policies so you can pay more taxes in the future.

2. Less taxes for your heirs

The less taxes you pay in your life, the more you either have to spend now or pass on to your heirs.

However, with some investment structures you may also be able to reduce the inheritance tax liability for your heirs. Assurance vie can be very tax efficient for estate planning purposes, for example. You want a solution that limits inheritance taxes while allowing tax efficient income and investment growth throughout your life. So explore your options.

3. More flexibility in estate planning

Strategic tax planning can also help make life easier for your family when you are away. Many investment agreements that offer tax efficiency also provide more flexibility and control in estate planning.

Some UK pensions are only transferable to your spouse if you die. However, if transferred to a Qualified Recognized Overseas Pension Scheme (QROPS) or reinvested in a tax efficient structure suitable for France, you can often go on to inherit the funds without having to pass them on to other selected beneficiaries.

4. Maximizing the real return

In this global climate of economic uncertainty and persistently extremely low bank interest rates, effective tax planning also helps ensure returns exceed the cost of living.

Ultimately, when assessing the value of investments, “real” returns count – after taxes, expenses and inflation are taken into account. Real estate, for example, is often praised for generating relatively high returns over the long term, but when applying stamp duty, local tax rates, capital gains, and property taxes, the tax burden can be high compared to other assets.

When investing, the starting point should always be to ensure that your portfolio is well diversified and tailored to your situation, needs, goals, time horizon and risk tolerance. Without proper tax planning, however, returns can be reduced by taxes that could have been avoided or significantly reduced. So this is also important.

This is how you get the best results

It’s easy to misunderstand home improvement tax planning, especially when regulatory target posts change frequently. Expatriates have the added complication of having to grapple with the tax rules of more than one country at a time when the global tax audit is highest.

Doing something wrong can create an undesirable and unexpected tax burden, not to mention the stress of clearing it up.

Tax planning shouldn’t be done in isolation or after the fact – make it an integral part of your investment, retirement, estate planning, and overall strategic wealth management 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 best results, seek help from an advisor with a thorough understanding of cross-border taxation, including how the French tax system interacts with UK regulations. Not only do you offer the peace of mind that your tax and financial planning in France is compliant, but you can also ensure that your income needs and goals are met in the most tax efficient way, without causing unnecessary future tax problems for your family.

Tax rates, scope and relief are subject to change. All tax returns are based on our understanding of current tax laws and practices, which are subject to change. Tax information has been summarized; One person is asked to seek personal advice.

Tax rates, scope and relief are subject to change. All tax returns are based on our understanding of current tax laws and practices, which are subject to change. Tax information has been summarized; One person is asked to seek personal advice.

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