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TAX

What exactly do I need to tell the taxman about my assets outside France?

The French tax declaration season is now open, but how much do you really need to tell the French taxman about your affairs outside of France? International tax specialist Jason Porter explains some essential information.

What exactly do I need to tell the taxman about my assets outside France?
Photo by PHILIPPE HUGUEN / AFP)

Tax declarations

Every year, anyone who is resident in France (and some non-residents) must fill out the annual tax declaration. Declarations are now open for 2022 – covering your income from 2021.

If you live in France, it’s almost certain that the tax declaration will be compulsory for you, and if you are non-resident but you have income in France (for example rental income from a French property) you will also need to fill out the declaration.

It’s important to note that if you live in France but all your income comes from abroad (eg a UK or US pension), you still need to fill out the declaration. Find the full details HERE.

But the French tax form only covers my income in France, right?

Wrong. This is the source of much confusion to foreigners in France, but actually you need to tell the French taxman about all your assets.

Most jurisdictions operate on the basis that if you are resident, then you declare your worldwide income, and if you are not resident you only declare the income which is actually sourced in that jurisdiction. If that was it, then you could pay tax twice – eg in the UK and France – on the same income.

The Double Tax Treaty between these two states is designed to eliminate this possibility.  As an example, tax paid in the UK on UK rental income is available as a tax credit against the French tax liability on the same income.

Unfortunately, many UK nationals living in France appear to be under the impression they do not need to declare UK source income in France, as they have already declared it (and paid tax on it) in the UK.  This is not the case – all non-French income still needs to be declared on a French tax return. 

The commonest areas of non-declaration are around UK source rental income, UK bank interest and other UK investment income (dividends, etc., from shares and securities in companies and funds).  

In particular, ISAs are commonly missed off French tax returns. Whilst they have tax efficient status in the UK, in France you would “look through” the ISA vehicle, and declare the underlying dividends, interest and capital gains on your French tax return.

What about bank accounts at home?

The French government has recently taken steps to further strengthen its fight against tax fraud, extending the disclosure regulations to also cover non-active bank accounts.

You must now declare all non-French bank accounts and life insurance policies, even if you have not deposited any funds, earned any interest/gains or made any withdrawals. The penalties for failing to declare a foreign account are the same whether it is active or not (and these can be substantial).

This has now become even more real with the CRS (Common Reporting Standards) exchange of financial information between states.  

We are already seeing evidence of French tax offices calling UK nationals in for interviews to discuss their non-declaration of foreign bank accounts, rental income, and capital gains, based upon information provided by UK financial institutions to the French tax authorities.

What are the recent changes about?

This is all happening at a time of a fundamental change in the basis of taxation in France.  

Most other developed nations introduced a form of “Pay-as-you-Earn” taxation many years ago but in France this came in in 2019.

From January 1st 2019 French tax residents have been subject to a monthly withholding tax on their income for that year.  

So do I still have to do the declaration if I am taxed at source?

Yes, for the moment anyway.

This is set to change in the future, but at present most employees still have to complete the declaration – the exception is certain groups whose circumstances have not changed since their 2021 declaration. If this is you, you will have been contacted directly by the tax office, if you have not received a notification you still need to do the declaration. 

When do I need to pay up by?

Tax declarations opened online earlier in April with the deadlines varying depending on where you live in France.

READ ALSO The French tax calendar for 2022 

Any balance of tax due must be settled by the end of the year (penalties will apply for non-payment). Or, where applicable, the tax authorities will refund any overpayment.

If you are an employee and you’ve already had your income taxed at source, you might actually get money back from the taxman if you qualify for any tax breaks or rebates – more details on those here.

Jason Porter is Business Development Director of Blevins Franks Financial Management Ltd.

For more information on the French tax declaration, how to fill in the form and where to find professional help if you need it, head to our tax section HERE.

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TAX DECLARATION

Late fees, fines and charges: What you risk by missing French tax deadlines

The deadlines for the annual French tax declaration are upon us, but what are the penalties if you either miss the deadline or fail to file your return at all? We take a look at the sanctions.

Late fees, fines and charges: What you risk by missing French tax deadlines

The annual Déclaration des revenues – income tax declaration – involves virtually everyone in France filling out a form giving detailed information on their income to French tax authorities.

If you live in France, it’s almost certain that you will have to complete this – even if you’re a salaried employee and your tax has already been deducted at source, or if all your income comes from outside France (eg a pension received from the UK or USA).

There are only a very few exemptions to the requirement to fill out the tax declaration and they are listed here

Declarations for the 2021 tax year opened in April 2022 and the deadline is either late May or early June, depending on where you live – find the full calendar here

But what happens if you miss the deadline?

For most people there is a staggered system of late charges.

If you are less than 30 days late your overall tax bill can be increased by up to a maximum of 10 percent.

Once you receive a notice of late payment, the overall bill can increase by up to 20 percent, or 40 percent if you have still not filed within 30 days of receiving the later payment notice.

You will also be charged interest on late payments.

What if I don’t pay income tax in France?

If you have no taxable income in France – for example your only income is a pension from another country – then you still have to fill in the declaration.

If you file late the increases cannot be applied, since your tax bill is €0, but you can instead be liable for a late fee of €150.

What if I have exceptional circumstances?

If you know that you will not be able to file in time, you can ask the tax office for a remise gracieuse (remission) in order to avoid late fees and penalties.

You will need to outline your reasons for not being able to file in time and while there isn’t a list of accepted excuses, the reason must be exceptional circumstances such as serious illness or the death or a loved one.

If you have previously missed deadlines, the tax office will be less likely to accept your request.

The request should be made by June 29th either in person at the tax office or through the messaging system in your online tax page.

What if you don’t declare everything?

If you have not declared income which is subsequently discovered by authorities, the increase in your overall tax bill can be up to 80 percent – the maximum penalty is usually reserved for people who have deliberately tried to hide parts of their income.

We have a full guide to what you need to declare HERE, but the basic rule of thumb is that you need to declare everything, even if it is not taxable in France, eg income from a rental property in another country.

France has dual taxation agreements with countries including the UK and USA so if you have already paid tax on income in another country you won’t need to pay more tax in France – but you still need to declare it.

What about foreign bank accounts?

Another item that frequently catches out foreigners in France is overseas bank accounts.

If you have any non-French bank accounts, you need to list them on your tax declaration, even if they are dormant or only have a very small amount of money in them.

This also applies to any foreign investment schemes you have, such as life insurance policies. 

The penalty for not listing accounts is between €1,500 and €10,000 and that applies for each account you fail to declare. 

What if I made a mistake on my declaration?

In 2018 France formally enshrined the ‘right to make mistakes’, giving people the right to go back and correct their declarations without attracting a penalty.

So if you realise you have missed something off or added the wrong info you can either go back into your online declaration and correct it or, if you file on paper, visit your local tax office.

However the ‘right to make a mistake’ does not extend to late filing.

What if I didn’t make a declaration?

The French tax system is often confusing for foreigners, with many people wrongly assuming that if they are not liable for tax in France then they don’t need to fill in the declaration.

For people who persist in not making the declaration, even after the arrival of the notice of default, tax authorities can make an estimate, based on earnings and lifestyle, and present the bill.

However for new arrivals in France it’s likely that they will not be registered with the tax office and will therefore never receive a notice. 

In this instance it’s always better to come clean – if you have made a genuine mistake and you approach the tax office  (rather than waiting for them to watch up with you) you will usually be dealt with quite leniently. 

How can I get help?

If you’re struggling with the system, there are ways to get help.

The tax office has an English language information page here, and a dedicated helpline for internationals on + 33 1 72 95 20 42.

You can also visit your local tax office, every town has one and you can simply turn up without appointment and ask for help (although if the office is small and your query is complicated you may need to make an appointment for the full discussion). Surprising as it may sound, employees at the tax office are generally pretty friendly and helpful and can guide you through the forms you need to fill in.

If your tax affairs are complicated and/or your French is at beginner level, it may be better to hire an accountant to ensure that everything is in order. You can find some tips on getting professional help HERE.

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