What’s New For French Taxation in 2009

Country:  France

12 February 2009

With France being one of the most popular destinations in which Brits’ wish to buy property overseas, we asked tax specialist, Blevins Franks, to look at the French government’s approved amendments to taxes for 2009.

Wealth tax holiday
One of the most beneficial changes is the “five year wealth tax holiday” for newcomers to France that applies to all nationalities. Anyone arriving in France after 6th August 2008 and who had not been tax resident in France during the previous five years will have their non-French assets free of wealth tax for a period of five years. 

The wealth tax rates have been increased from 2009. Wealth tax is levied on the worldwide assets of tax residents and non-residents on their French assets as at 1st January each year. View the 2009 tax rates in the March issue of Homes Overseas magazine – out next week.

The income tax rates for income earned in 2009 are not likely to be announced until much later in the year. However, for income earned during 2008 tax is payable in 2009. The scale rates will also be published in March’s issue of Homes Overseas magazine.

A tax credit (Décote) is available if the tax due is below €862 (£786). For those in receipt of a retirement pension, disability pension, child support and alimony, the taxable base will benefit from a 10 per cent deduction of a minimum of €367 (£335) and a maximum of €3,592 (£3,274) per household.

Social charges
The new UK/France Double Tax treaty, which is expected to come into force in 2010, will allow credit to be given in France against social charges for UK tax paid, as well as against tax, where a tax credit is available. The current Treaty does not provide for UK tax to be offset against social charges. The new Treaty was due to be in force from 1st January 2009 but was not ratified by either the UK or France in time.

There has been a slight increase in the social charge (another form of tax) on investment income from 1st January 2009. The social charge on investment income, which includes net rental income and capital gains, rose to 12.1% from 11%.

It has been reported that some British expatriates have been incorrectly assessed for social charges on their pension income, largely because local tax offices have been giving out the wrong information. Social charges are not levied on non-French pension income for those who have registered an E121 or E106. If neither of these E-Forms has been registered pension income is liable to a social charge of 7.1%, and must be declared to the French tax office and the social security office (URSSAFF).  Now the authorities are checking all foreign pension income to make sure that the appropriate treatment has been given. Seek advice from a qualified tax specialist as soon as possible if you have not been declaring your pension income correctly.

Capital Gains Tax (CGT)
When it comes into force, the new UK/France Double Tax Treaty will close a loophole concerning CGT on UK real estate, whereby gains arising on UK real estate are not taxed in France. Under the new Treaty, any CGT paid in the UK will be deducted from the French tax although no credit will be given if the UK tax liability is higher than the French one. 

Those registered as a “professional furnished landlord”, providing they have met the relevant conditions, are free from CGT on their property after five years if their income in the year of sale does not exceed €90,000 from 1st January 2009 (€250,000 in 2008).  The criteria for becoming a professional furnished landlord changed from 1st January 2009. A turnover of at least €23,000 per annum is now required from furnished lettings and the income must constitute at least 50% of your earned income, instead of just having income from furnished lettings in excess of €23,000.

The tax-free exemption on gains on the sale of shares per household per annum increased to €25,730 from 1st January 2009 (€25,000 in 2008).

The CGT rate on the disposal of shares for residents of France rose 2% to 18% from 1st January 2008 plus social charges of 12.1% from 1st January 2009.

David Franks, chief executive of Blevins Franks tax advisory service, wrote this piece for homesoverseas.co.uk.

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