New declaration requirement for French property owners
The French tax office has introduced a new declaration requirement, which concerns all property owners, and consists of reporting the occupancy status of their French properties by no later than 30 June 2023. This is due to the abolition of the taxe d’habitation for all main homes and will identify which properties are still due to pay the tax as they are designated secondary/holiday homes.
New repair grants system (not the same as the MaPrimeRénov’ which is still in operation)
A new grant available for repairs to various household appliances including drills, washing machines, cleaners, etc. The grants could save you up to 20% BUT you need to use a ‘QualiRépar’ certified professional, which may prove more expensive anyway! Anyone who is interested should visit the site here https://www.label-qualirepar.fr/. There is no paperwork involved, just a requirement to use properly registered companies that are certified to do the repairs.
New business formalities website INPI
From the start of this year you are now required to complete all business formalities (creation, change and cessation) through a single website here https://formalites.entreprises.gouv.fr/. It is an all encompassing website so it can be a little confusing to start but everything is now centralised which will reduce confusion and duplication in the long run.
Changes to Capital Gains Tax (CGT) allowances
From April 2023 the UK annual allowance (gains you are allowed to make before you are subject to tax) for CGT will reduce to
£6,000 from the current £12,300, it will further be reduced to £3,000 from April 2024.
Making Tax Digital (MTD) initiative
Self-employed businesses and landlords with annual business or property income above £10,000 (a couple would split joint income from a property in this case) will be required to submit quarterly returns under MTD. This was originally scheduled for introduction in April 2024, it has now been postponed until April 2026 so I will not be contacting individuals concerned this year.
Statutory Residence Test
An important reminder. If you spend more than 45 days in the UK, in any one period, then you could be subject to UK residency under the UK 2013 Statutory Residence Test. Residency is assumed If you trigger: 46 - 90 All 4; 91 - 120 At least 3; Over 120 At least 2 (183 or more is considered automatically resident regardless). The ties requirements are slightly different if you were a UK tax resident in the past three tax years so please let me know if you need further clarification.
French Tax Update
- An accommodation tie
- You have an accommodation tie for a tax year if you have a ‘place to live’ in the UK which is available to you for a continuous period of at least 91 days in the tax year, and at least one night is spent there. A ‘place to live’ in the UK could be a home, holiday home or temporary retreat in the UK, or other accommodation that you can live in when you are in the UK.
- A family tie
- Husband, wife or civil partner (unless they are separated)
- Their partner if they are living together as husband and wife, or as civil partners
- A child, if under 18 years old.
- Work tie
- A work tie for a tax year if they do more than 3 hours of work a day in the UK for at least 40 days in that year. It does not matter whether the days are continuous or intermittent. There were exemptions to this during the pandemic for key workers like yourself.
- 90 day tie
- if you have spent more than 90 days in the UK in either or both of the previous 2 tax years immediately before the year under consideration.
The income tax bands and scale rates for income received in 2022 are:
Net income Tax rate
Up to €10,777 Nil
€10,778 – €27,748 11%
€27,749 – €78,570 30%
€78,571– €168,994 41%
Over €168,995 45%
This is per part of the household, therefore, if you are a two person household the above income limits would be doubled, etc. There are also additional parts or half parts allocated for people living with disabilities and for other reasons.
Social charges in France
There are no changes to the standard rates of social charges, which are payable on top of income tax in France. The upper level of social charges remains at 17.2%. There is a reduced rate of 7.4% on pension income for those whose taxable income is less than approximately €2,000 a month (€3,000 for a couple). If you have Form S1 or private health insurance (not top-up) you do not need to pay any social charges for your pension income, regardless of the amount you receive.
French tax on investment income
There are no changes to the Prélèvement Forfaitaire Unique, or ‘flat tax’ scheme introduced in 2018. We can still also opt to use the scale rates of income tax instead (plus social charges), though this would have to apply to all your income. I would automatically calculate and declare the income this way if it was more tax efficient than the 'flat tax'.
There is no government proposal to amend taxation of assurance-vie policies.
Note: Capital gains on the sale of shares. Only shares purchased prior to the PFU introduction in 2018 (1st Jan) will be able to claim the allowance for duration of ownership (relief at the rate of 50% or 65%) that was available under the previous tax regime. The allowance will also be dependent on the household (not the individual) opting to be taxed using income tax scale rates on all investment income. Otherwise, for all new shares purchased since 2018, and for shares purchased prior to this date where you opt for the PFU, no allowance for duration of ownership applies.
French wealth tax
The Impôt sur la Fortune Immobilière (IFI) which only applies to real estate assets means that your savings and investments, including assurance-vie policies, are exempt. It will continue to only apply to real estate; the current €1,300,000 threshold and €800,000 allowance stay in place for 2022; the scale rates of tax (0.5%-1.5%) are unchanged, and the 75% limitation remains available (The tax can not be more than 75% of your income).
French inheritance tax
The proposed changes to the inheritance tax rates (including step children) have been deferred again.
As a general reminder. You can now opt out of French succession laws for an estate of an individual who passed away whilst resident in France or of an individual who owned property in France (just the property in latter case). I would like to make you aware of the following points:
Micro VAT ceilings
- You would need to register this option and lodge your will with your French Notaire.
- Although succession rights may be avoided (please see the additional note below) inheritance tax will still be based on French rules which depend on the relationship of the receiver to the deceased rather than on the total estate
- Step-children are treated as strangers in French law and taxed at a rate of 60% on anything over €1,594
- Currently, although this is being appealed, if a direct descendant also lives in France you can't exercise the above right for their portion of the estate under French succession rules.
- Although grandchildren and great grandchildren can receive tax free gifts of €31,865 and €5,310 respectively, inheritance tax starts at €1,594 for each and is at a rate of 55% (up to the 4th degree of relationship and 60% thereafter).
The exemption amounts for a micro enterprise are:
- € 91 900 before tax (in 2022) for the activities of sale or provision of classified accommodation (B&B and some Gite properties)
- € 36 800 before tax (in 2022) for the activities of service delivery and professions services.