7th September 2015
By Mary Taylor, Partner, Blevins Franks
Automatic exchange of information is almost here. What does it mean for you, as an expatriate living in France?
This loss of financial privacy affects us all. If we live in one country and have assets in another, our information will be shared between countries. Tax authorities will be able to track our wealth like never before.
If you are a French tax resident and have, for example, investments in the Isle of Man, or bank accounts in Switzerland, or pension funds in the UK, the French tax authorities will receive information about these assets. This will include your name, address, tax identification number (where applicable) and the account and income details.
Almost a hundred countries have committed to automatic exchange of information so far. They will follow the Common Reporting Standard developed by the Economic Co-operation and Development (OECD). Information will be shared annually between governments, and this will happen automatically, for everyone who owns assets outside their country of residence. So not only where tax evasion is suspected.
The information to be exchanged includes account balances, interest, dividends and sales proceeds from financial assets. This covers entities like trusts as well as individuals.
Reporting financial institutions include bank, certain collective investment vehicles, certain insurance companies, custodians and guardians. They will determine your residence, collect data on your assets and income, and forward it to the French tax authorities.
The ‘early adopters’ group, which includes France along with the rest of the EU, will start sharing information in 2017. However they start collecting data next year. Other countries will join the following year. The list includes so called ‘tax havens’ like Switzerland, Channel Islands, Isle of Man, Cayman Islands, Monaco and Singapore.
In Europe, the Common Reporting Standard will be implemented through the Administrative Cooperation Directive. This provides for automatic exchange of information on interest, dividends, other investment income, sales proceeds from financial assets, income from employment, directors’ fees, life insurance, pensions and property.
Once the French tax authorities receive this data, they will be able to compare it to your annual income and wealth tax returns.
It is essential you understand which assets and income need to be declared in France. As a French tax resident you have to declare your worldwide income, gains and wealth. This includes income which is taxed elsewhere, such as UK rental income and pensions. Although the income is declared and taxed in the UK, you are still obliged to declare it in France. Many people who have paid UK tax incorrectly believe they have no further requirement to declare it on their French tax returns.
Although UK government service pensions remain taxable in the UK and are not taxed in France, the income must still be declared here and is taken into account for the purposes of determining the rate of tax payable on your other French source income.
Likewise, people who live in France and rent out UK property often believe that, since they have obtained their non-resident land certificate, they have no further reporting requirements or liability. In fact, the income needs to be declared in both the UK and France.
We still have the right to structure our assets in the most tax efficient way, but you have to be careful to only use arrangements which are compliant in France. There are arrangements which can be very effective, but take specialist to make sure you get it right.
Blevins Franks Seminars
Dealing with specifics…
What do the following mean for you?
☞ European Certificate of Succession
The Blevins Franks seminars provide an update on these important issues and explain the implications for residents of France.
☞ CAHUZAC-SUR-VÈRE (in Tarn) – Wednesday 7th October
Learn more about Blevins Franks