Tax Matters - French and International Aspects
Published 02/02/10
In this rapidly changing world the taxman is more and more watching over you and your assets making professional advice needed more than ever. Intelligent planning can help you mitigate your taxes in a perfectly legal way.
BEWARE OF FRENCH TAX RESIDENCE
1/ TAX RESIDENCE CRITERIA
FRENCH DOMESTIC LAW CRITERIA
According to French domestic law you can be considered as French tax resident if one of the following conditions is met:
- your family lives in France even if you spend most of your time out of France
- you spend more than a 183 days/year in France
- you spend more days in France than in any other country
- you have the disposal of a house in France
- you have the center of your economic interests in France
- you have a professional activity in France
TAX TREATY TIEBREAKER RULE
Should another country also consider you as resident under its domestic law, the tiebreaker rule of the applicable treaty (if any) must be analysed for your residence country to be identified.
2/ TAX IMPLICATIONS OF FRENCH RESIDENCE
FRENCH DOMESTIC LAW PROVISIONS
French tax residents are taxable in France at income tax, wealth tax and inheritance tax on their worldwide income and assets whereas non French tax residents only have a limited French tax liability based on French source income and assets .
As an exception and under specific conditions a recent law allows newly French tax residents to be liable to French wealth tax only on French source assets for the first five years of French residence.
TAX TREATY PROVISIONS
Above mentioned provisions are subject to the tax treaty applicable between the residence country (i.e. France) and the source country of the income or location country of the asset. The tax treaty (if any) can provide for taxation in the residence country, in the source country or in both countries with a tax credit to avoid double taxation.
DISCLOSURE OF FOREIGN BANK ACCOUNTS
French tax residents must declare their foreign bank accounts when filing their French income tax return. Otherwise capital withdrawn can be taxed as income and fines ranging from 1 500 to 10 000 euros can apply per undeclared account.
3/ HOW TO MITIGATE TAXES FOR FRENCH RESIDENTS
HOW TO MITIGATE FRENCH INCOME TAX
French tax residents can mitigate French income tax using the “Assurance-vie” policy which provides for a very privileged taxation of the growth drawn from the policy. The growth which is not drawn from the policy remains untaxed.
Specific French tax rebates and credits can also mitigate French income tax such as the ones given regarding house employees, children nursing, loan interest for acquisition of main house - expenses on main house to save energy - investments in real estate for rental and investments in small and medium companies.
New tax rules also provide for a privileged taxation of interest and dividends as well as income of expatriates in France.
HOW TO MITIGATE FRENCH WEALTH TAX
French tax residents can mitigate French wealth tax using the applicable allowances for main houses, shares, rented properties and joint properties. The “Assurance-vie” policy as well as investments in small and medium companies, forestry and/or art can also offer interesting possibilities to mitigate wealth tax. The “Bouclier fiscal” rules provide than you can not be taxed more than 50% of your income (taxes including income tax, property taxes, wealth tax and social contributions).
HOW TO MITIGATE FRENCH INHERITANCE TAX
French tax residents can mitigate French inheritance tax using the “Assurance-vie” policy which provides for a very privileged taxation of inheritance between family members but also between unrelated persons. Periodic gifts mainly to children can highly optimise inheritance tax.
For further information, please contact : Stephanie Glasper, AZUR TAX
73 avenue du Campon
06110 Le Cannet
Tel. 0033(0)493458328
Mob. 0033(0)675613534
Email. sglasper@azurtax.com
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