Finances and taxes explained for buyers in France

From income to real estate wealth tax, here is a clear, jargon-free look into the finances and taxes that you will pay when you buy and live in France. This information was provided by financial specialists Chase Buchanan in a webinar by Your Overseas Home.

Living in France: the taxes you will pay

For those who live in France for more than half the year, whether you have an income from a pension or work, you will be paying social security contributions. This is France’s equivalent to national insurance in the UK and is divided into generalised social contribution (C.S.G) at 9.20% and social debt repayment (C.D.R.S) at 0.50%, totalling 9.70%. This is payable regardless of the tax banding that you fall into.

Income tax

France has a sliding scale for income tax, which changes on 1^st of January. Here are the tax rates for 2023:

France has a different approach to tax from the UK in that they tend to be laser-focused on targeting high earners. If you have an income of less than €100,000, you will generally be taxed less than you would be in the UK. If you have a yearly income above €250,000 you will be subject to additional tax. Tax residents of France are taxable on their worldwide income, subject to the provisions of their relevant tax treaty.

Real estate wealth tax in France

You will have to pay real estate wealth tax in France if your property (or properties) exceeds €1,300,000 in value. When it goes over this figure, you are only paying 0.50% on anything between €800,000 and €1,300,000. Real estate wealth tax moves up on a sliding scale from here.

If you move to France and maintain a property portfolio in the UK, then you have five years before you will be taxed in France for those homes. So, you are not going to be subject to real estate wealth tax in France immediately, unless you are purchasing a property that is over €1,300,000.

Taxation on moveable properties

This is a tax that we do not have in the UK, but it is essentially a tax on anything inside your home that is not bricks. The type of items that can fall into this category include antiques, vehicles, art and electronic devices. For example, if you had a set of cars that you are renting out, then you would be taxed 30% on the income or on the capital growth. 

Your UK pension while in France

Once you have moved to France and want to drawdown your pension, it is advisable to inform the French authorities as you will be taxed less than you would be in the UK. They will then give you a form and inform HMRC. From here, you will receive your pension as taxed by France.

However, if your pension is not in drawdown, the process can be more complicated and it is recommended that you reach out to a financial specialist, such as Chase Buchanan. 

Inheritance tax

While inheritance tax in France is notoriously complex, fortunately, the Double Taxation Agreement between the UK and France does cover inheritance tax. So, as you soon as you become a resident in France, you are subject to the inheritance rules in France. For deceased residents in France, all worldwide assets are subject to inheritance tax. Financial specialists Chase Buchanan can assist you in mitigating the effects of inheritance tax.

Tax on traditional portfolios inside or outside France

Once you move to France, there will be interest in the capital gains of any of your investments. In recent years, international reporting has increased, so the French authorities will be aware of any overseas assets that you have.

In January 2018, France made it so that interest and dividends from your traditional asset portfolios are subject to either subject to 30% flat tax (PFU) or income tax, your choice.

Corporation Tax

France actively encourages people to set up businesses there, and entrepreneurs have an easier time than they would in the UK. Corporation Tax is set at 26.5%, though it does increase if you have a large company.

Wrapping Up: Navigating the French Financial Landscape

When it comes to settling in France, understanding the diverse landscape of taxes and finances is crucial. This country focuses on capturing revenue from higher income brackets, from the progressive income tax rates to the individual real estate wealth tax. Remember that while treated favourably, your UK pension requires timely notification to French authorities for tax benefits.

Owning a property portfolio, especially one valued over €1,300,000, incurs the real estate wealth tax, while movable properties like art, antiques, and vehicles are also taxed differently. This tax complexity extends to your traditional asset portfolios and corporations, with France offering varied rates to encourage entrepreneurship and economic growth.

The inheritance tax in France is known for its complexity and requires expert assistance for optimal financial planning. As you move into this new economic landscape, consulting financial specialists like Chase Buchanan can help ensure a smooth transition and help you maximize your financial advantages.

Ultimately, the tax system in France is distinctive, with a laser-focused approach to high earners and intricate provisions across different forms of wealth and income. But with a clear understanding and strategic planning, it can offer an appealing fiscal environment for those considering making France their home.