TAX RES­I­DENCY RULES

Living France - - The Essentials -

Q

We have a sec­ond home in France and won­dered what ad­vice you could give to peo­ple who de­cide to stay in France, in our case Char­ente, rather than com­ing home within the ‘180 odd’ day rule. Is it ex­actly 180 days or 183? If peo­ple opt to stay longer in France than in the UK what would they have to do to com­ply with French law, taxes, pa­per­work, etc? We be­lieve our pen­sion would have a 16% tax rat­ing which would be bet­ter than the UK. What ac­tion/ pa­per­work is nec­es­sary to com­ply at the present time? I be­lieve if we choose prin­ci­pal own­er­ship in France now and se­condary in the UK, it might be an an­swer to Brexit un­cer­tainty. JUDY HAST­INGS

A

The tax res­i­dence rules in the UK and in France are com­plex and you have to look at each coun­try’s leg­is­la­tion to de­ter­mine which one has the right to treat you as tax res­i­dent. As a gen­eral rule, the coun­try that you are res­i­dent in has the right to tax you on your world­wide in­come.

The main test in France is not ac­tu­ally time-based; in­stead, you are con­sid­ered tax res­i­dent if your main home is in France. This em­braces ideas of per­ma­nence and sta­bil­ity and ig­nores tem­po­rary ab­sences, and is the rule the French au­thor­i­ties will most rely on. The foyer is the place where your close fam­ily (i.e. spouse and mi­nor chil­dren) ha­bit­u­ally live. You are also con­sid­ered to be French res­i­dent if you spend more than 183 days in France per cal­en­dar year or if your prin­ci­pal ac­tiv­ity is in France, e.g. oc­cu­pa­tion is in France (whether salaried or not), or your main in­come arises in France. Fi­nally, you may be con­sid­ered res­i­dent if France is the coun­try where most of your sub­stan­tial as­sets are lo­cated (cen­tre of eco­nomic in­ter­ests).

You also have to con­sider whether you re­main UK tax res­i­dent un­der the UK Statu­tory Res­i­dence Test. The UK rules are even more com­plex than the French ones and de­pend on var­i­ous dif­fer­ent fac­tors which are too wide to be cov­ered here.

It is pos­si­ble that you are con­sid­ered res­i­dent un­der both the UK and French rules. In this case you have to re­fer to the UK/France dou­ble tax treaty to de­ter­mine which coun­try has the pri­mary right to tax your in­come.

If you do be­come French res­i­dent, most types of in­come will be tax­able in France and some types of in­come may be tax­able in both the UK and in France. You may in fact have to sub­mit tax re­turns in both coun­tries de­pend­ing on your sources of in­come. As you can see, it is im­por­tant that you un­der­stand how the tax res­i­dence rules ap­ply in your cir­cum­stances. It is a com­mon mis­take to as­sume that you can choose where to pay your taxes. This can be an ex­pen­sive mis­take and you should seek spe­cial­ist tai­lored tax ad­vice. ROB KAY

Sum­marised tax in­for­ma­tion is based upon our un­der­stand­ing of cur­rent laws and prac­tices which may change. In­di­vid­u­als should seek per­son­alised ad­vice.

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