Expatriation: taxation
Taxation for French expatriates in the UK and English expatriates in France
Here’s some information about what you’ll have to pay if you’re a French expatriate in the UK; the information below is subject to regulatory changes over time, so you can’t take it at face value; only a tax lawyer can give you definitive information at “time T”.
We are not tax specialists, and the information we provide here is correct to the best of our knowledge, but is for information purposes only.
If you are a French tax resident, i.e. you live in France for at least 6 months and one day a year, you will need to file a French tax return, mainly to cover tax on your income, dividends, any property sales or personal assets. As in the UK, you may also be liable for capital gains tax on the disposal or sale of assets.
If you have a company incorporation in the UK and you have generated a real economic activity in this territory (creation of an economic substance in England, Scotland, Ireland,…), as a French tax resident, you will have to pay UK corporation tax and taxes and you will pay French income tax, flat-tax and/or dividend tax (depending on your choice of personal remuneration). (This will need to be confirmed by your tax lawyer).
If you have a company in the UK and you have not generated any real economic activity in this territory (creation of an economic substance in England, Scotland, Ireland,…), as a French tax resident, the French tax authorities will consider that your activity is carried out, by default, in France and your English company will then be taxed in France, in the same way as if you had created your company in France and you will also of course pay income tax and/or dividend tax in France (depending on your choice of personal remuneration). Penalties may be added to these taxes, if the default activity is not English but French. In this case, we don’t know whether or not the English authorities will be able to reclaim English corporation tax. (This will have to be confirmed by your tax lawyer).
Economic substance:
Economic substance” means that trading companies must have a real presence and carry out economic activities in the country in which they are tax resident. The reality of an economic presence is justified by the occupation of premises, offices, warehouses, the recruitment of employees, the installation of office equipment and, in particular, the organization of material and immaterial activity.
Double taxation agreement
Since December 2009, the UK and France have had a double taxation agreement in place, which means that you can legally avoid being taxed on the same income in both countries – but you will have to pay tax somewhere.
Are you a French tax resident?
If you live in France for more than 183 days, you will be considered a French tax resident. You may also be considered a French tax resident, if, notwithstanding the length of residence, it is established that France is your principal residence.
Principal residence depends on many factors, such as where your main assets are located, where your personal and professional interests are concentrated and, for example, where your business is based or where your family lives.
Income tax information
Permanent residents of France are required to pay income tax on their worldwide income. One of the main differences between income tax in France and the UK is that, unlike in the UK, income tax in France is calculated on the basis of household income – not that of individual family members.
The income tax due is based on the number of people in the household, i.e.: total household income (people generating income) divided by the number of “parts” in the household (number of people living in the household). Generally, one person is equivalent to one share, except for the first two children, who are counted as half a share. (This notion of shares should be confirmed by your tax lawyer).
Therefore, if you are a household with two adults and one child, your income tax bracket will be calculated by dividing total income by 2.5 (i.e. 2 shares and half a share for the first child). This is compared to a household with two adults and five children: calculation method: divided by 6 (two shares for both parents, 1 share for the first two children and 3 shares for the next three children). (This notion of shares should be confirmed by your tax lawyer).
However, both adults must be married or in a civil partnership, otherwise only one parent can claim tax responsibility for the household.
Once the tax bracket has been established, the tax can then be calculated.
Another major difference between UK and French income tax is that in France, all members of the household are required to file a tax return. Even though tax is now deducted at source for various types of income (Prélèvement A la Source), a final tax return is still compulsory and will decide whether you still owe money to the tax authorities or are entitled to a refund.
The French tax year and tax returns
The French tax year is the same as the calendar year (i.e. January to December), and tax returns must be submitted by the end of May if submitted offline, or by the end of June if submitted online. (Check if offline filing is still possible).
Penalties for late filing
If you file your tax return late, you’ll be subject to a fine of 10% of your tax liability.
Payment of income tax
Fortunately, the French government does not require you to pay your tax in a single instalment; you are entitled to payment in instalments. That said, you will be asked to pay in advance.
Other taxes for expatriates in France
In addition to your income tax, you also have to pay both a television tax and a taxe d’habitation.
TV tax (licence fee)
As in the UK, if you own a television, you must pay TV tax. It is assumed that every household has a television, so if you don’t own one, you must declare it as such on your tax return.
Council tax
The taxe d’habitation is due on every property in France, whether a principal residence or not, and is payable by the occupant. It is due in October.
Other taxes for expatriates in France
In addition to the taxes listed above, you may also be liable for a number of other taxes in France, including capital gains tax, wealth tax, inheritance tax, property tax (taxe foncière), …
The taxe foncière is a tax payable by property owners, whether or not they live in the property. As with the taxe d’habitation, the amount of tax due is calculated by multiplying the average rental cost in your region by a percentage set by the commune.
In another dossier, we’ll look at the taxation of a French expatriate in the UK.
Updated on December 20, 2022