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Wealth Tax in France Anyone resident in France is taxed on their worldwide assets. Blevins Franks explains  Unlike in the UK, France levies a Wealth Tax. Anyone resident in France on 1st January is taxable on their worldwide assets, whereas non-residents with assets in France are taxed on the value of their French assets as at the same date. So, if you become a resident of France then you will be liable to wealth tax on your worldwide assets. The tax is based on the wealth of the household, including your spouse or co-habiting partner and dependants. The wealth tax liability is reduced by €150 for each dependent child under the age of 18, though. Taxable assets include: real estate, cars, other vehicles, furniture, horses, jewellery, shares, bonds, the redemption value of any life assurance or endowments and debts due to you. Liabilities, such as outstanding debts, are deducted in arriving at the net chargeable figure and there is a general exemption (available to residents and non-residents alike) of €770,000 for 2008. For French tax residents the value of an occupied principal residence may be reduced by 30% for wealth tax purposes and there can be similar reliefs for let properties depending on the length and terms of a lease. If you are resident in France, your combined wealth tax, income tax,(including tax on capital gains) and social charges cannot exceed 85% of the income and gains of the household. If it does, then the wealth tax is reduced € for €, although if your wealth exceeds €2,450,000, the reduction is restricted to 50% of the wealth tax at the most. In addition, a new relief was introduced in 2006 (known as the Bouclier Fiscal – see below), and which has been further increased by new laws passed on August 22nd 2007, which restricts combined income tax and wealth tax, social charges as well as the taxe foncière and taxe d'habitation on you main home to 50% of your income. For most people, this new provision will be more beneficial than the 85% restriction. The 85% relief is given in at the time of payment of wealth tax, whereas the 50% relief cannot be claimed until the following year, although there is no upper limit to the reclaim. Non-residents of France are liable to tax on their French assets valued at over €770,000 at 1st January 2008, including the value of shares in any company which owns real estate in France, like a Société Civile Immobilière (SCI). However, loans to the individual (or the SCI) specifically attached to the French assets may be deductible against the asset value to reduce the wealth tax payable. Non-residents are liable to wealth tax on any property or any rights over property situated in France, whether held directly or indirectly, including shares or interests in unquoted companies whose seat of management is situated outside France and where more than 50% of the assets comprise property in France. This definition includes properties held in France by non-residents through the intermediary of any company or organisation in which the taxpayer holds directly or indirectly more than half of the shares. Please note that these rules also apply for succession tax purposes. Where the ownership of a property is split into usufruit (lifetime interest) and nue-propriété (underlying bare ownership), the full value of the property (not just the lifetime interest) is assessed on the owner of the usufruit. Accordingly, the owner of the nue-propriété is exempt. Similarly, it is the usufruit holder who is entitled to any income from the asset and who in the case of a property would be the registered owner for taxe foncière, say. The holder of the usufruit is only assessed to wealth tax on the portion of the property over which their entitlement exists. So, if you have a usufruit over only one quarter of the property, you will pay wealth tax on one quarter of the value of the property. Other exemptions include:
The deadline for filing and paying your wealth tax is June 15 in the year. Payment cannot be deferred or paid in instalments.
Bouclier Fiscal For the Bouclier Fiscal, the composition of the household is assessed at the date the right to receive the refund is acquired. This is the 1st January following the year in which the taxes are paid. So, for example, in the case of an unmarried couple who pay wealth taxes on a household basis but file income taxes separately, their income and tax liabilities would need to be split between them in order to calculate the 50% restriction. The excess taxes paid over 50% must be reclaimed by the taxpayer before the 31st December following the year in which the taxes are paid. For example, if taxes are paid in 2008 (based on 2007 income and wealth at 1st January 2008), the 50% ceiling is calculated on 2007 income in respect of the taxes paid in 2008. The taxpayer has until the 31st December 2009 to claim the refund. Double Tax Treaty France and the UK signed a new Tax Treaty on June 19 2008, to replace the existing Treaty which dates back to 1968. Before the new Treaty becomes law, certain procedures need to take place (i.e. parliamentary approval, ratification and exchange of diplomatic notes), but it is hoped this will happen in the autumn of 2008. If this is the case, the new Treaty could be in force in France as early as tax year 2009 (and 2009/10 in the UK). A previous Treaty was signed on January 28, 2004 but this will not proceed. The new agreement provides substantial relief from French wealth tax for UK nationals (who ar not also French nationals). For the five tax years after becoming a resident of France, the wealth tax will only be based on assets in France, and therefore all other assets will be ignored. In the sixth year following French tax residence, wealth tax would then be payable on net worldwide assets as normal. If you later become a non-French tax resident for a period of at least three years, and then become a resident of France again, then the five year exemption will start again. This new rule, assuming it is in effect, will provide significant relief against French wealth tax for at least five years. It also might imply that if you are thinking of becoming a resident in France you should try to arrive at the beginning of a tax year, rather than the end of the previous tax year, in order to stretch out the five year exemption time period. For readers who are seriously contemplating becoming resident in France, it is well worth considering taking out a Personal Portfolio Bond like an Assurance Vie, which is a specialised form of life assurance arrangement which may reduce your wealth tax liability. Updated August 2008 For more information on any of the above issues,
contact The Blevins Franks Group offers Financial Services
including tax advice, offshore trusts, Blevins Franks Tax Advisory Service |
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