ASK THE EXPERTS
Whether you’re planning your move to France, or are already living there, our panel of professionals aims to keep you fully informed with the best advice for every eventuality
Our experts give their advice on selling shares, irrigating gardens and long-term rentals
THE LION’S SHARE
Q The question I have is with regards to selling shares when you have a number of them of the same company, bought at different times and therefore different prices. For the calculation of capital gains do you have to sell the oldest shares first (First In First Out – FIFO) or alternatively Last In First Out? Simon McBride A If you are resident in France you are liable to French capital gains tax on the sale of shares (including unit trust funds and those within ISAs, as these are not tax-efficient in France) wherever they are held. The gain is taxable at the scale rates of income tax, plus social charges of 15.5%, bringing the total tax rate up to 64.5%.
The capital gain is equal to the difference between the disposal consideration and the acquisition cost. To answer your question, when you have a number of shares from the same company that you bought at different prices, the method to calculate the gain is the weighted average acquisition cost of those shares.
For example, say in 2010 you acquired 100 shares at a cost of €93 each. In 2014 you acquired a further 200 shares in the same company at a cost of €105 each. In 2016 you sold 250 of those shares at a price of €115 each.
In order to determine the net gain, the weighted average acquisition cost of these shares is: [(100 x €93) + (200 x €105)]/300 = €101. Thus, the net gain is (250 x €115) – (250 x €101) = €3,500.
While the marginal tax rate is high and the potential charge significant, French capital gains tax on shares is not as bad as it looks as there are several measures to reduce your liabilities.
Indeed, France has a general taper relief of 50% for investments held for between two and eight years and 65% for holdings of more than eight years. Therefore, if you hold shares for at least two years, 50% of the gain on disposal would be free of tax, and if held for more than eight years, 65% of the gain would be tax-exempt. However these exemptions do not apply to social charges, which remain payable on the full gain at a flat rate of 15.5%.
There is also a more generous relief governing the sale of shares relating to small and medium companies (SMEs) created within the last 10 years, and which are based within the European Economic Area (EEA). This relief also applies to sales of EEA SME shares by business owners on retirement, as well as shares sold within a family. In those cases, 50% of the gain is exempt for investment held for between one and less than four years, 65% if held for more than four years but less than eight, and 85% thereafter. ROB KAY
* Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
TURNING OVER A NEW LEAF
Q My husband and I are thinking of retiring in the French countryside. I am an avid gardener and need to find out about irrigation there. Do people tend to use sprinklers or hoses, or do they prefer to use well or stream water? Chris Lane A Rest assured that there will be no problem when it comes to garden irrigation in your new French jardin. There are indeed sprinklers and seep hose systems readily available at garden centres and the quincaillerie. Older houses out in the country tend to have outdoor wells, while new builds have outdoor taps.
The majority of the older generation of countryside gardeners use well water, and it’s a simple matter to purchase a pump and use water from the well. Do make sure that the pump you buy is powerful enough to lift the water from the bottom of the well, as some are quite deep. Also, check the quality of well water to ensure that there are no natural minerals that may be harmful to plants (I doubt there will be, but it’s as well – forgive the unintended pun! – to be sure).
The rain that falls on the roof of your house can be put to good use, and there are various ways of storing it. Plastic water butts are useful. In wine-producing areas, it might be possible to purchase old wooden barrels that have been discarded in favour of more modern containers. Farmers often buy chemicals in plastic tanks; provided they are washed out thoroughly (and away from any natural water source into which they might leak), these can also be used.
You might notice that in gardens and allotments, rain is collected from shed roofs via guttering and into an old bath or open-topped container. If you do this, make sure that you wedge a log or plank of wood on the inside to allow frogs, lizards and birds to clamber out should they be unfortunate enough to fall in. It is, though, best to cover any water container – not only to prevent accidents but also to minimise evaporation. Happy gardening! JEREMY HOBSON
Q I have a question about long-term renting over one year. Prior to me having to find private rental for most of 2016, I had been looking at renting via French agencies.
I was advised that to do this I would need proof of earnings in France. Later in the year I heard that EU legislation was coming that allowed for proof of earnings in any EU country. So my question is whether or not my three years’ accounts for earnings in the UK is sufficient? Also, should I have registered with the tax authorities in France even though I was being taxed in the UK? Michael Baker A There is a halfway house between renting long-term unfurnished, permanent accommodation and finding somewhere to stay for longer than a holiday but not committing you to a long lease of three, six or nine years, which is the norm in France. Most estate and letting agents, when they talk about renting, assume you want this kind of a lease. Very few are conversant with the possibility of location meublée which is a perfectly legal way of letting a furnished property for up to one year. For this type of rental you may not be asked for proof of earnings, but the owner would probably ask for a reference, be it from a bank or a professional person who can vouch for you. They would then require a month’s worth of damage deposit along with one month’s rent in advance.
If you intend to come and stay in France for more than 183 days in the year, then yes, you would be deemed to be resident in France, so should register with the local tax office. You would then pay your taxes in France but would be able to take advantage of the double taxation treaty between the UK and France to make sure you were not taxed twice on the same income. That is a very complex field that is not possible to address in this reply to your query, but you can find many tax experts who will be able to advise you on your particular circumstances. ANNE CUNNINGHAM-DAVIES