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Are taxes behind rise in exodus of rich French?

New figures have revealed a huge jump in the number of top earners leaving France for abroad. It begs the question whether high taxes might be to blame.

Are taxes behind rise in exodus of rich French?
Are taxes behind a rise in number of wealthy French people heading abroad? Photo: AFP
Actor Gérard Depardieu may have been the most high profile wealthy Frenchman to take his fortune abroad, but he's not the only one.
 
Indeed French film director Luc Besson announced this week that in future he would be paying his taxes in California rather than France.
 
The leaving of the likes of Depardieu has helped fuel the image that any French person worth a bit of money was packing their suitcase to escape the country's tax man – who shot to global fame in 2012 when François Hollande vowed to introduce a 75 percent levy on millionaires.
 
And new figures published by financial newspaper Les Echos, which came from the Ministry of Finance at Bercy, will only give ammunition to those on the right who accused the Socialist government of driving  the wealthy abroad.
 
In 2013 the number of French tax payers earning over €100,000 a year leaving for abroad rose by 40 percent, Les Echos says, with 3,744 individuals heading for the departure gates.
 
That compares to 2,674 in 2012, the year Hollande was elected and 1,330 in 2010.
 
And for the very, very rich who earn over €300,000 each year, the number of nationals quitting France rose by 46 percent from 451 in 2012 to 659 in 2013
 
Les Echos notes that while the exodus of high earners rose by 40 and 46 percent, the increase in the overall number of French going abroad rose by six percent.
 
Another recent study on the migration flows of the world's richest people by New World Health also spelled bad news for France. Over the period of 200 to 2014 France was ranked third in the world for the number of millionaires (42,000) who left the country.
 
The main question being asked in the French press on Friday was whether Hollande's notorious election promise to introduce a 75 percent tax rate could be to blame.
 
But the figures show that recent rise in the trend of wealthy French heading abroad began in 2011, when Hollande's predecessor Nicolas Sarkozy was still in charge.
 
 
But are they all fleeing from the French tax man?
 
When trying to explain the rise in departures Les Obs news site suggests the Sarkozy's policy of demanding more from those earning over €250,000, as well as Hollande's 75 percent tax on millionaires, may have both played a role as the high 45 percent tax bracket.
 
But add a little perspective only 0.3 percent of French citizens who are subject to special wealth tax that kicks in on fortunes over €1.3 million, are exiled abroad.
 
But most studies suggest the French are simply heading abroad for professional rather than tax reasons and that goes for the country's most wealthy too.
 
Speaking to The Local previously, Fabienne Petit director of international activities at French firm Humanis, which works with French expatriates in the area of health cover and insurance, explained it was a myth about wealthy French fleeing the tax man.
 
“It’s a real cliché to say that all French people are going abroad for only fiscal reasons. In fact only 17 percent of people leave for financial reasons, so we need to put an end to this myth,” Petit told The Local. 
 
Her view was backed up by a 2014 parliamentary report into French expats which stated that: “The fiscal motivation is rarely put forward as the first or most essential reason by those concerned”.
 
Nevertheless Les Echos notices that the number of French nationals departing for Portugal has tripled between 2010 and 2013, which is believed to be down to the Iberian country's fiscal advantages.
 
No figures were given for the number of wealthy French nationals returning home over the same time period, but from this year the French government intends to publish an annual report on all the comings and goings of its tax payers, which may shed more light on a phenomenon that continues to cause concern, given the loss of revenue to the French state.
 
 
 

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PROPERTY

The post-Brexit tax rules on selling second-homes in France

British second-home owners in France who want to sell their properties are being warned of an extra layer of administration - and expense - in place since Brexit.

The post-Brexit tax rules on selling second-homes in France

Brits wishing to sell property in France may now need to appoint a représentant fiscal (tax representative) in France in order to properly declare the sale to French tax authorities. 

Who?

This law applies to people who own property in France but do not live here – mostly that would be second-home owners but it could also apply to, for example, anyone who has inherited property.

This requirement has always been the case for non-Europeans such as Americans, Canadians and Australians and now also applies to Britons since the end of the Brexit transition period. People who live in another EU or EEA country are exempt.

The law is based on residency, not nationality. So if, for example, you have your main residence in the UK but have an Irish passport, you would still be covered by this requirement.

Exemptions

As well as EU residency, there are a couple of other exemptions;

  • If you sell your property for less than €150,000
  • If you have owned the property for more than 30 years (in which case the sale is exempt from capital gains tax and social security contributions).

What is a représentant fiscal?

This is simply a representative for tax purposes in France, and the person does not need specific qualifications in law or accountancy.

The following can be appointed:

  • A company or organisation already permanently accredited by the tax authorities;
  • A bank or credit institution operating in France;
  • The buyer of your property, if they are domiciled in France for tax purposes (they do not need to be a French citizen);
  • Any other individual who is domiciled in France for tax purposes (they do not need to be a French citizen) – in this case they will need to be accredited by the local authority;
  • If the property is in Paris, the individual will need to be accredited by the Île-de-France tax authorities – département de Paris-Pôle gestion fiscale Centre-Missions foncières, 6 rue Paganini, 75020 Paris. Tel: 01 53 27 46 45

If you decide to appoint an individual rather than a company as your représentant fiscale, bear in mind that the process can be quite complicated, so it would be better to check that they are confident in dealing with the tax authorities, to ensure that you don’t end up with unfinished business with the tax office.

If you chose a company, they will naturally charge for the service. 

Whichever representative you chose, you will need to provide a dossier of documents relating to the property sale and also confirming that you are a tax resident of a country outside France (tax returns, banking information, for example).

Will you have to pay tax on the proceeds of the sale?

If your main residence is not in France, you have no other income in France and you do not complete the annual French tax declaration you will not usually have to pay tax in France on the proceeds of the sale, provided your total estate is worth less than €1.3 million.

Properties worth more than €1.3million may be liable for the impôt sur la fortune immobilière (property wealth tax).

You will of course have to declare the income from the sale in the country where you are resident and, if applicable, pay capital gains tax.

What about French property taxes?

If you have owned property in France you will have been paying the taxe foncière and taxe d’habitation.

These will cease, but bear in mind that taxe foncière is charged based on who owned the property on January 1st of the relevant tax year. So if you sold your property in February 2022, you will still get a tax bill in autumn 2022 to cover that year. Only the following year will the new owner become liable, unless the sale contract for the property included an agreement to share or split outstanding taxes.

Find more information on the Internationals section of the French tax office website HERE or pay a visit to your local tax office in France. Find your local office by searching ‘Centre des Finances publiques’ plus the name of your commune – tax offices are open to the public on a walk-in basis and the staff are usually friendly and helpful. 

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