Buying a Property in France? Don’t Forget to Move Your UK Pension Overseas
Tax Advice for British Expats Resident in France
There are more than hundred and fifty thousand Brits living in France, most of which buy up farmhouses or invest in real estate in France. But, most forget to look in to how to organize the rest of their affairs. British expats need to move a portion of their monies into EUR and if they are retiring in France, it makes sense to get your pension into EUR, so that currency fluctuations don’t destroy the stability of pension income.
A move to France avoids UK inheritance tax on assets. As soon as you move out of the UK and lose UK tax status and become a French tax resident, you are out of UK IHT. But, whilst you avoid UK inheritance tax of up to 40%, your French property may be taxed in France at up to 45%.
Moving Your UK Pension Overseas as a French Resident
If you are a Brit living in France, you need to think about what you are going to do with your existing UK pensions. Don’t just leave them in Pounds in the UK where your pension will be taxed under UK rules if you have a large pension pot. You can transfer it offshore and get your pension into EUR.
You then avoid UK taxes and just pay French income tax at retirement, with no tax on death. The simplest way to do this is to transfer your pension offshore.
Keep reading to find out how to transfer my UK pension to France.
Where Do Brits Live in France
Most Brits actually live in the Ile de France, according to a 2006 census, where there are 20,500 Brits resident there.
Dordogne actually comes second, and may only have a larger number of British home owners if second homes are included.
The next largest region for permanent British residents is Midi Pyrénées (13,500), followed by Aquitaine (13,100), Poitou Charentes (12,972), and Brittany (approx 11,000).
Provence-Alpes-Côte d’Azur and Rhône-Alpes come in fourth and fifth.
French Succession Tax
If you retain ‘strong links’ with the UK, or if you have been in France less than three years prior to your death, it may well be deemed by the UK tax authorities that you retain UK domicile, and thereby a liability for UK inheritance tax on your worldwide assets. Otherwise, you face French inheritance tax.
If you are deemed domiciled in France, worldwide assets are taxed, subject to tax treaties. If not, then only your French assets are taxed. Life insurance proceeds are generally subject to a 20% flat rate after deducting an allowance of 152,500 euros per beneficiary.
Unlike English inheritance tax, French inheritance tax (“droits de succession” en Francais) is paid by each beneficiary and not by the deceased’s estate by reference to the value received after deduction of all liabilities.
In the past, beneficiaries were obliged to pay off the inheritance taxes within six months of when the estate becomes determined. However, some tax relief is available now as the tax authority is able to grant up to 10 years (or 5 years if it is not the child/grandchild of deceased) to pay the taxes due, provided some form of guarantee can be offered, and on condition that at least 50% of the inheritance is in the form of non-cash assets. Interest is charged on the outstanding sum. Where the non-cash assets are less than 50% of the inheritance, then the taxes are due within six months of determination of the estate.
The amount of tax depends on the type of beneficiary and how they are related to the deceased. French inheritance tax is payable by each beneficiary on their share of your worldwide assets. If you die domiciled outside France, then only your assets in France are liable to French inheritance tax. Although this tax law was changed in 2013 and it now includes French residents (e.g. British expats).
New EU Legislation Concerning British Expats in France
From 17th August 2015, EU regulation 650/2012, otherwise known as Brussels IV will over-ride former legislation.
Under the Regulation, after 17th August 2015, any British national who has property in France, or for that matter any participating EU State, and who has taken appropriate action before their death, can choose either the law of the country of their habitual residence, or the law of their nationality (or choose one of their nationalities if they have multiple passports) to govern how their French assets will be devolved.
If they make no choice then the default position is that the succession of their estate will be governed by the State of their habitual residence. In this case, I would be France.
So, you MUST make an election in your Will of who you want to have your property left to in your Will.
Click here to speak to a QROPS Specialists for British expats in France.