The UK has a statutory residency test to determine whether you have left the UK. This needs to be read with the UK France Double Tax treatyThere is a lot of speculation about jobs moving from the UK to France following Brexit. The following is a non-exhaustive checklist of matters to consider before moving to France. It is essential to get advice on your personal position before making the move.
Leaving the UK
The UK has a statutory residency test to determine whether you have left the UK. This needs to be read with the UK France Double Tax treaty. There is a risk you may not have left the UK if your return visits are frequent. It is best to be clear about where you are resident for tax purposes.
Becoming French resident
You become French resident by arriving with the intention of remaining. Normally you will cease to be UK resident on the day you become French resident. Usually, the French formalities are dealt with some time after you arrive.
Income Tax
As a French resident, you are liable to French income tax on your worldwide income. There are various exemptions which should be looked at carefully in advance. It may be necessary to amend your contract of employment before you arrive.
Social Charges
You will have to pay French social charges on your income (includes pension income) and capital gains. These are high and complicated.
Wealth Tax
France has a Wealth Tax (ISF) which is an annual tax based on your net assets as at 1st January in each tax year. You do not pay this tax on your non-French assets for the first 5 years of residency in France. The tax is worked out on a household basis. The net value of the taxable assets must exceed €1.3 million to become taxable.
Exit Tax
If you leave France after 6 years of residence in France you are deemed to dispose of all shares and the notional gain may be taxed.
Inheritance Tax
French residents are liable to French Inheritance tax on their worldwide estates. In addition, French residents who have been resident for 6 years and receive an inheritance of assets from a deceased resident outside France are also liable to pay French Inheritance Tax. This means that if you received a legacy from say your parents in the UK you could potentially pay Inheritance Tax in France as a beneficiary. It is quite possible that there would be no UK Inheritance Tax payable on the estate in the UK but tax payable in France by you as the recipient.
Succession Planning
Since 2015 with the EU Succession Regulation, the rules have changed fundamentally and testators can choose the law of their nationality to apply to their estate. However, if you are habitually resident in France and do not make such a choice, French law will apply to your worldwide assets (except where a country does not apply the EU Regulation) and this will include any reserved (or forced) heirship provisions.
In addition, the matrimonial property regime must always be liquidated before any Will or intestacy provisions can apply. This is not an area which is familiar to English people and you should get expert advice early on.
Matrimonial Property Regimes
France has a system of matrimonial property regimes. These are significantly more comprehensive that English prenuptial (or post-nuptial) agreements. A matrimonial property regime is always applied regardless of the existence of not of a formal agreement. Generally, English married couples will be deemed to have a “separation of assets” regime which is the French “analysis” of the default matrimonial property regime in England.
The position can be more complex for couples who lived outside England after they were married. This can however be changed and after 10 years residency in France will mutate into the default French matrimonial regime (a form of community of assets). There are significant changes coming here in 2019 with another EU Regulation.
It is worth giving some thought to this as it affects devolution of assets both on death and divorce.
Marital home
Under French law there is a presumption and obligation on a married couple to live together – couple who do not live together may find it administratively and fiscally challenging. Generally, the French tax authorities will insist on spouses filing joint returns, even where one is not living in the country. This presumption and obligation can also affect the position in a subsequent divorce.
Divorce
The financial settlements on divorce in France are very different from those in the UK; the judges have less discretion and significantly more weight is given to the matrimonial property regime (see above). This can lead to “forum races” where each spouse seeks to serve proceedings in the jurisdiction which is most favorable to them. This will be further complicated once Brexit is complete, as it is not yet clear what jurisdiction rules will continue to be in place.
Same-sex marriages and civil partnerships
Whilst generally a UK same-sex marriage will be recognized in France, there are some additional considerations that same-sex couples should take into account. Generally, a married couple will still be considered married when the move to France. However, if the marriage is an “upgrade” from a civil partnership this may not be the case (this point is technical and must be considered on the facts). Where a couple
Where a couple are in a civil partnership, they may be treated as being in a PACS. However, the consequences, such as inheriting on intestacy are very different. Again, specialist advice based on individual circumstances is required.
Couples in a PACS (and therefore in a civil partnership) will also need to consider the equivalent of a “matrimonial property regime”, a partnership property regime. The rules for these are different from matrimonial property regimes and there is a separate EU Regulation coming into force in 2019 to deal with this in an EU cross-border situation. This will be relevant to French resident couples even after Brexit.
“Non-legal” relationships
Where people are in relationships which are not legally recognised there may significant complications. Depending on the nationality of the “significant other” there may be immigration issues. There are also significant tax disadvantages if the significant other inherits (French inheritance tax at 60%).
Buying a French flat
France does not have the English “leasehold” concept. Flats are “freehold” with the rights of owners set out in the copropriété rules. Notaires often act for both buyer and seller and have a role largely restricted to identifying the parties and enduring the buyer gets good title. Comprehensive reports on title are usually not provided. There are plenty of pitfalls in the French conveyancing process.
Renting your UK property
You will continue to pay your UK income tax on your rental revenue and benefit in France of a relevant tax credit with the UK France Double Tax treaty.
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