New to France? Here’s what you need to know

Whilst France is one of the most popular destinations for expats to move and settle in, it is also notoriously difficult to navigate in terms of tax efficiency and financial planning. To avoid large tax liabilities, it is a good idea to consider your options beforehand; consulting a financial adviser with the relevant local knowledge can make this process a lot easier. We have put together some of the most important things to consider as advised by our Senior Financial Adviser, Rosemary Sheppard, who moved to France in 2015 and offers her financial expertise throughout the country.

Savings and ISAs in the UK

One of the primary concerns of expats when moving abroad is regarding the savings and ISAs they have built up in the UK. Whilst these tend to be very tax efficient in the UK, this is not the case in France; you must report any gains made on your investments on a yearly, and sometimes even monthly, basis to the French government, which is less than convenient. If these savings are cashed in once you have moved to France, it may create a potentially large Capital Gains Tax liability, which can date back to the inception of the investment, not just the point at which you move to France. This does not necessarily mean you must cash in your investments before moving, as each persons circumstances are individual, but we do recommend seeking professional advice beforehand to ensure you are getting the most out of your money and won’t face any nasty shocks.

Pensions and Tax-Free Lump Sums

Another area of uncertainty for many expats is what will happen to their pensions and tax-free lump sums when moving to France. If your pension is a state or government pension, then nothing has changed as a result of Brexit and you can access your pension as normal. However, things have become more challenging if you have a personal pension as some companies are not being as flexible with offering access to non-UK residents. To avoid this issue, you can transfer your pension elsewhere or draw it down entirely, which can result in a hefty tax payment. Whilst transferring your pensions might seem like an overwhelming process, it can be done with relative ease with the assistance of an adviser. It can be beneficial to consider options like QROPS or SIPPs onceyou have moved, but if you are considering taking your tax-free lump sum you should think about this before leaving the UK, as a tax-free lump sum does not exist in France. If you are over 55 and eligible to access your lump sum and are intending to use it to purchase property than you should withdraw this sum before moving.

It is important to remember you don’t have to move your money into Euros, even if you opt for a QROPS – due to concerns over moving savings into Euros, some expats are opting to keep their investments and savings in GBP. This will also make more sense if this money is purely for beneficiaries, and you do not need to access it for retirement.

How to Pass Savings on Tax Efficiently

If you are concerned about ensuring your savings can be passed on in a tax efficient way to your beneficiaries you have a couple of options: if your savings are in a pension plan, then leaving them in there is most often the best plan, as pensions are already a tax efficient way of passing on money to your beneficiaries. Another way is taking advantage of an investment in an Assurance Vie. This is similar to an ISA in that it ‘wraps up’ your savings in a tax efficient way and your investment is allowed to grow tax free. In terms of withdrawals, it is only the part of the withdrawal that has made a ’gain’ that is subject to tax and social charges.

How is Assurance Vie Taxed?

Higher rate taxpayers can choose to be taxed at the lower rates associated with the Assurance Vie. There is a flat tax rate of 30%, which is comprised of a 12.8% investment tax (from years one to eight) plus a 17.2% social charge. After year 8, if your net premiums are below 150,000 euros you can benefit from a reduced tax rate of 7.5% and reduced social charges in some circumstances. If you are a nil-rate taxpayer, then you may only be subject to social charges on the part of the withdrawal that has made a gain.

Assurance Vie investments are fully accessible if set up in the correct way which can be ensured with the assistance of an adviser. However, it is important to bear in mind that there are different versions depending on which company is offering the scheme. After your eighth year there is a tax-free withdrawal allowance of 4,600 euros (9,200 euros for joint policies) however this sum will still be liable to social charges.

Assurance Vie and Long-term Planning

The Assurance Vie is also very tax efficient for beneficiaries, as they can inherit up to €152,500 at 0% tax (the next €700,000 will be taxed at 20%). This means that anyone who is not a blood relative, including step-children and unmarried partners, can avoid being subjected to a possible 60% Inheritance Tax liability. However, different amounts apply if the initial investment is made over the age of 70. The money in this account can be in US dollars, sterling or euros and can be ported with you should you move countries. It is particularly tax efficient should you move back to the UK as it will become an offshore bond. Another benefit of this scheme is that the investment and risk level can be adjusted as your needs change, making it an investment option that can be tailored to you. It is also exempt from Wealth Tax.

With all the above considered, we advise seeking financial advice before moving to France, as making unsound financial decisions can cost you dearly in tax liabilities later down the line.  

For a no-obligation consultation with one of our advisers, click the link below.

This communication is based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity.

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