Are You An Expat Living In France?
The Cost of Living in France
The cost of living in France is broadly comparable to that of the UK but can vary according to different sectors. For instance, while food tends to be more expensive in France, transport and childcare costs are cheaper.
Housing also tends to be cheaper in France, though this does vary by area. The average house price in the UK in August 2022 was £296,000, compared to €242,000 in France (roughly £212,250).
Do keep in mind that any strengthening in the Euro and rates of inflation would have an impact on the value of any UK-based pension funds. However, a financial advisor can assist with this.
Managing and Declaring Overseas Assets
There’s much more to consider than the cost of living. When you move to France, it’s vital you declare any bank accounts, securities, insurance, annuities and property you hold. You need to do this separately from your annual tax return to comply with the French Government’s rules and regulations.
If you don’t report your foreign assets when you live in France, you could incur a fine of 40%. Any undeclared assets abroad could also be taxed at 60% if you can’t prove their origin.
While some information is available in English, an independent financial advisor who has knowledge of the French taxation system can ensure you comply with the rules.
Tax in France
Unlike the UK tax year which runs April to April, in France it runs from 1st January to 31st December. Even though some tax is paid at source, as with the UK’s PAYE system, everyone in France needs to submit a tax return.
In France, tax is worked out on a per-‘household’ basis as opposed to an individual one. That means married couples file their return together, with unmarried couples filing their own (even if they live together).
There are 5 main tax bands in France:
- €0 – €10,225 – 0%
- €10,226 – €26,070 – 11%
- €26,071 – €74,545 – 30%
- €74,546 – €160,336 – 41%
- €160,337 and over – 45%
Thankfully, the UK and France have a double taxation treaty that ensures that taxpayers do not have to pay tax on the same income in both countries. However, it’s still important to declare this on your return to avoid an enquiry.
Preparing a French tax return can be complex, especially if you have income from the UK or another country to bear in mind, but an expert adviser can help.
Assurance Vie
If you wish to invest in France an Assurance Vie (translated as ‘Life Assurance’) is a product that has some similarities to a UK pension fund or ISA. The Assurance Vie offers tax breaks to encourage people to save for the future. The tax breaks mainly concern how the profits and income are taken after an 8 year term, so this should be considered a long term product.
Among some key benefits, the Assurance Vie doesn’t impose age restrictions and only taxes you at the point of withdrawal on the growth of your investment. Read our guide on the Assurance Vie system to learn more about the benefits and details of the scheme.
Succession and Inheritance Planning
Just as in the UK, you may have to pay tax on inheritance or gifts. However, one exception to this is that you can use your Assurance Vie to bestow a sum on a beneficiary tax-free.
Find out France’s tax allowances on gifts below, which can be used once in a 15-year period:
- Partner – €80,724
- Child – €100,000 per child from each parent
- Grandchild – €31,865 per grandchild from each grandparent
- Sibling – €15,932
- Nieces/Nephews – €7,967
Progressive taxation rates from 5% – 45% apply to different thresholds of these amounts, so it’s important to understand this before planning any gifts.
Benefits of Using an Independent Financial Advisor
Navigating the taxation system of a foreign country is fraught with potential difficulties. Failing to declare assets or misjudging your financial obligations could lead to a fine at a minimum or a jail sentence at worst. That’s where an independent financial advisor can help. They can help you assess your situation and then point you in the right direction so that you are sure that you are complying with all of France’s declarations. Most independent financial advisers will have knowledge of local tax advisors and accountants that can:
- Understand your individual circumstances and explain each stage of declaring your assets
- Ensure you comply with your obligations under France and/or the UK’s taxation rules and regulations
- Help you complete your annual tax return
- Enable you to get the biggest return from your investments
- Transfer your UK pension overseas
Galileo Wealth is a boutique financial advisor for expats. Contact us today to find out how we can help.
