By Mary Taylor, Partner, Blevins Franks
If French tax is not complicated enough, the rules on interest and dividends taxation make it even more so.
The flat tax rates that used to apply to interest and dividend income (and capital gains on the sale of shares) were abolished from this year. You will now pay tax according to your income tax bracket.
However, you may still need to pay an advance tax – Prélèvement Obligatoire Non Libératoire – when you receive interest and dividends, and this is at the old fixed rates of 24% and 21% respectively.
This is not necessarily the final tax due. You will pay any balance when you submit your income tax return
You are obliged to pay this advance tax every month you receive interest or dividends. Where the paying agent is in France, they will deduct it at source along with the 15.5% social charges. If outside France, you must submit form 2778-SD for interest and 2778-DIV-SD for dividends, with the tax due, by the 15th of the following month, or try and give the financial institution a mandate to file and pay the tax on your behalf. The latter option only applies within the European Economic Area (so not to the Channel Islands or Isle of Man).
Late payments are subject to a 10% fine.
If your household’s income for the penultimate year was below a set reference income, you can avoid the advance payment by submitting a waiver request to your financial institution. For 2013 income it had to be submitted before 31st March. In future the deadline is 30th November of the previous year.
The reference income for interest is €50,000 for couples (filing jointly) and €25,000 for single taxpayers, and €75,000/€50,000 for dividends.
This is an extra tax headache for many expatriates in France. You could consider moving your savings and investments into alternative structures which would avoid all this hassle and are generally more tax efficient.
Social charges on UK income
Another area of complexity is the issue of tax and social charges on UK source income. Different French tax offices take different views. The position of the Direction de la Legislation Fiscale is that where a French resident receives a UK government service pension and/or UK rental income, provided that this has been declared to the UK tax authorities they should receive a credit for the French income tax and social charges.
With any tax related issue, you should seek professional, personalised advice.
There have been 21 new French finance acts in the last five years.
How much tax is too much?
Do you need help protecting your wealth?
Blevins Franks are holding a series of private seminars to discuss how these changes affect your wealth.
Please contact us if you would like to attend or if you would prefer a personal appointment.
Mary Taylor : 05 62 30 51 40