|
Pensions
It
would appear that an increasing number of people are retiring to France
with occupational or state pensions being their only or principal source
of income. This issue of the
week deals with some of the basic taxation aspects of pensions.
TAX
RESIDENCY
Those
people physically present in
France
for more than 183 days in a year are deemed to be tax
resident there (be the presence continuous or discontinuous).
It should also be borne in mind that even those physically present
for less than this period may be deemed to be tax resident in
France
should
France
constitute their centre of economic interests, for
example.
If
tax resident, it is your obligation to make an annual tax return.
France does not operate any distinction between tax residency and
domicile (as in the UK, for example) so all of one’s income, wherever it
arises and even if not repatriated, is liable to French tax and must be
declared.
TAX
TREATMENT OF PENSIONS
The
taxation of a pension, be it state or occupational, of somebody resident
in
France
receiving a pension from another country will be
governed by the double taxation treaty between
France
and the country where the pension is based.
For
example, the taxation treaty between
France
and the
UK
specifies that the pension is to be taxed by the
country where the person receiving the pension is resident (save for
certain pensions paid to government servants which are taxed solely in the
UK
). Therefore,
if you are French resident, you will need to declare your
UK
pension on your annual French tax return.
It is advisable to apply to the Inland Revenue to request that your
pension is not taxed at source. Although
you will not be subject to double taxation, you will receive a tax credit
for the UK tax paid so taxation in both countries will increase the
administrative burden unnecessarily (as you are liable to pay French tax
anyway, regardless of whether the UK has taxed first, it is easier to
proceed on this basis). More
information about this (as well as forms) can be obtained from the UK
Inland Revenue’s website at: www.inlandrevenue.gov.uk.
Certain
types of private pension can be tax inefficient in France and it may be
advantageous to consider early draw down or some other arrangement prior
to becoming tax resident in France (you will effectively be French tax
resident from the time that you move to France).
Specific advice from a financial adviser may need to sought in this
regard.
CALCULATION
OF TAX IN
FRANCE
A
French resident pays tax in accordance with his or her personal situation
on a sliding scale. There are
a number of reliefs and allowances that may be applicable.
For taxation treatment of pensions, a deduction of 10% is normally
applied to arrive at the taxable amount.
For income up to 4,191 Euros, the tax rate is 0.
Between 4,191 Euros and 8,242 Euros it is 7.05%; between 8,242
Euros and 14,506 Euros it is 19.74% e.t.c. (figures for tax return in
2002). By simply taking the
taxable amount and applying a percentage, a vague idea of where one is on
the scale can be arrived at but a more meaningful indication would require
a much more complex calculation.
It
should be noted that this issue of the week is only a basic guide and that
full personalised advice should be sought from a suitably qualified
professional.
23/09/2003
- Issue of the week
BACK
TO NEWS
|
