9 common tax traps for pensioners in France
Retiring to France is a popular option for many, but it can create confusion over where you should be paying your taxes. Here are some of the most common tax problems for pensioners in France.
When it comes to foreign retirees in France there are broadly two types - people who moved to France when they were younger, worked in France and then retired and those who stopped work in their home country and then moved to France as a pensioner.
In tax terms, it's a lot simpler to be in the first category - it means you are already 'in the system' from your days working in France, are registered for things like tax declarations and health cover and are entitled to a French pension (although the payments are likely to be small if you only worked for a few years in France).
READ ALSO How to calculate your French pension
Those who retire to France tend to be more likely to fall into some of the common tax traps outlined below, many of which stem from confusion over which country you should be reporting things to.
Here are some of the most common errors;
Failing to make an income tax declaration
The annual income tax declaration known as the déclaration des revenues has be completed by almost everyone living in France - even if they have no income here.
Most retirees are living on a pension from their home country (possibly supplemented by savings or income from property or investments) and have no French income, so many of them assume that they don't have to fill in the French income tax declaration.
While this is a logical assumption, it is in fact incorrect and you must complete the annual declaration if you are a tax resident in France.
Explained: Who has to do a tax declaration in France?
Confusion over tax residency
This brings us neatly to the issue of 'tax residency', which is one that frequently causes confusion.
The French tax authorities consider you a tax resident of France if you;
- Live in France
- Work or earn any kind of income in France
- Have the centre of your economic interests in France
The government's definition of living in France is that France is your 'main place of residence' and it defines this as 'you stay there more than six months of the year'.
For people who have their full-time home in France then, this is pretty simple - you are a tax resident, even if all your income comes from overseas (eg foreign pension).
It gets a little more tricky for second-home owners and other frequent visitors who can sometimes find themselves tipped into the tax residency category through length of stay. Similarly, second-home owners who rent out their property for part of the year should be aware that this is French income that needs to be declared (using the annual tax declaration form for non-residents of France).
Explained: The rules on tax residency in France
Failing to declare foreign income
The other thing that frequently trips people up is what you actually include on the French tax declaration - many people assume that it is only asking about French income, or that you do not need to declare anything that you have previously paid tax on in another country.
In fact, if you live in France you need to declare all of your worldwide income on the French form - including pensions from overseas and other income such as that from property rentals in another country or investment income.
If your country has a tax treaty with France, which most countries do, you likely won't pay any tax on your non-French income - but you still need to declare it.
READ ALSO What exactly do I need to tell the French taxman about?
Failing to declare foreign bank accounts
When filling out the aforementioned tax declaration, you also need to declare all non-French bank accounts, even if they are dormant or only have a few pennies/cents in them.
READ MORE: Reader question: Do I need to declare my non-French bank accounts?
As for internet bank accounts (eg Revolut, Wise, Bunq), the situation is a little tricky. In general you will have to declare these, as most companies are based outside France.
The easiest way to know if you need to declare the account is to check the account's IBAN (International Bank Account Number). If it starts with FR then it's counted as a French account and you do not need to declare it. If it starts with different initials eg GB for the UK or BE for Belgium, then it's a non-French account and you must declare it.
The bank accounts section of the tax declaration is easy to miss because it comes in the bit about stocks, shares and investment plans which you may assume does not relate to you.
Failure to declare non-French accounts can lead to hefty fines.
Failing to file a property tax declaration
In 2023, French tax authorities created an additional requirement for anyone who owns a property in France - they must fill in a one-off Déclaration d'occupation, stating whether their property is their main residence or a second home.
If you filled this out already last year, and none of the information contained in the form has changed, then you do not have to fill it out again.
However, if you bought a house this year, if your situation has changed or for whatever reason you did not complete the declaration last year, then you will need to fill out the déclaration d'occupation this year.
The déclaration d'occupation is entirely separate from the annual déclaration des revenues. The property tax declaration must be completed by everyone who owns property in France, including second-home owners who are not tax residents of France.
Healthcare charges
Healthcare can also be a little complicated for those who have never worked in France - people who have worked in France and then retire here continue to be covered by the French state.
If you have never worked in France, you are still entitled to register within the French system after three months of residency - details on how to do that here - but exactly who picks up the bill depends on your nationality and personal situation.
EU and UK pensioners can apply for the S1 scheme - which means that the country where you were last working reimburses your costs.
Non-EU nationals and those who have taken early retirement may, under certain circumstances, be charged an annual bill for healthcare expenses via the PUMa system - full details here.
Tax on private v state pensions
Countries that have bilateral tax treaties with France usually have provisions so that foreign pensions are not taxed in France. However there can be some confusion when it comes to private pensions.
However, other types of investment packages used for retirement may fall into a grey area.
If you are concerned that you are being incorrectly taxed, you may need professional advice from an accountant to ensure that all your income is being dealt with correctly by the French tax system.
As for the US-France tax treaty, private pensions such as IRAs and 401(k)s are not taxable in France.
Tax v social charges
One thing to check first is whether money being deducted is in fact a tax. You might assume that it is, if it's money being taken by the government, but France has fact has two types of deductions - impôts (taxes) and prélèvements sociaux (social charges).
The latter is roughly the equivalent of National Insurance payments in the UK, they are social charges to cover things like healthcare or unemployment.
Income which is 'tax free' can still have social charges deducted in certain circumstances.
Wealth tax
And finally, it's worth checking whether you are liable for France's wealth tax. You might think you would know about it if you were wealthy, but in fact this tax doesn't only apply to the super-rich.
The wealth tax is a real estate tax and is levied on anyone who has real estate assets (eg property and land) worth €1.3 million or more - including property outside France in some cases.
This is especially pertinent to some members of the 'baby boomer' generation who have seen enormous inflation in property values in their lifetime. People who bought a modest family home back in the 1970s might find that it is now worth €1.3 million if they bought in places like London, south-east England, New York, or the west coast of the USA.
Once you have lived in France for more than five years, your global assets start to be counted towards the wealth tax calculation, which means that overseas property may tip you into the 'wealthy' category.
Find a full explanation of how the wealth tax works HERE.
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When it comes to foreign retirees in France there are broadly two types - people who moved to France when they were younger, worked in France and then retired and those who stopped work in their home country and then moved to France as a pensioner.
In tax terms, it's a lot simpler to be in the first category - it means you are already 'in the system' from your days working in France, are registered for things like tax declarations and health cover and are entitled to a French pension (although the payments are likely to be small if you only worked for a few years in France).
READ ALSO How to calculate your French pension
Those who retire to France tend to be more likely to fall into some of the common tax traps outlined below, many of which stem from confusion over which country you should be reporting things to.
Here are some of the most common errors;
Failing to make an income tax declaration
The annual income tax declaration known as the déclaration des revenues has be completed by almost everyone living in France - even if they have no income here.
Most retirees are living on a pension from their home country (possibly supplemented by savings or income from property or investments) and have no French income, so many of them assume that they don't have to fill in the French income tax declaration.
While this is a logical assumption, it is in fact incorrect and you must complete the annual declaration if you are a tax resident in France.
Explained: Who has to do a tax declaration in France?
Confusion over tax residency
This brings us neatly to the issue of 'tax residency', which is one that frequently causes confusion.
The French tax authorities consider you a tax resident of France if you;
- Live in France
- Work or earn any kind of income in France
- Have the centre of your economic interests in France
The government's definition of living in France is that France is your 'main place of residence' and it defines this as 'you stay there more than six months of the year'.
For people who have their full-time home in France then, this is pretty simple - you are a tax resident, even if all your income comes from overseas (eg foreign pension).
It gets a little more tricky for second-home owners and other frequent visitors who can sometimes find themselves tipped into the tax residency category through length of stay. Similarly, second-home owners who rent out their property for part of the year should be aware that this is French income that needs to be declared (using the annual tax declaration form for non-residents of France).
Explained: The rules on tax residency in France
Failing to declare foreign income
The other thing that frequently trips people up is what you actually include on the French tax declaration - many people assume that it is only asking about French income, or that you do not need to declare anything that you have previously paid tax on in another country.
In fact, if you live in France you need to declare all of your worldwide income on the French form - including pensions from overseas and other income such as that from property rentals in another country or investment income.
If your country has a tax treaty with France, which most countries do, you likely won't pay any tax on your non-French income - but you still need to declare it.
READ ALSO What exactly do I need to tell the French taxman about?
Failing to declare foreign bank accounts
When filling out the aforementioned tax declaration, you also need to declare all non-French bank accounts, even if they are dormant or only have a few pennies/cents in them.
READ MORE: Reader question: Do I need to declare my non-French bank accounts?
As for internet bank accounts (eg Revolut, Wise, Bunq), the situation is a little tricky. In general you will have to declare these, as most companies are based outside France.
The easiest way to know if you need to declare the account is to check the account's IBAN (International Bank Account Number). If it starts with FR then it's counted as a French account and you do not need to declare it. If it starts with different initials eg GB for the UK or BE for Belgium, then it's a non-French account and you must declare it.
The bank accounts section of the tax declaration is easy to miss because it comes in the bit about stocks, shares and investment plans which you may assume does not relate to you.
Failure to declare non-French accounts can lead to hefty fines.
Failing to file a property tax declaration
In 2023, French tax authorities created an additional requirement for anyone who owns a property in France - they must fill in a one-off Déclaration d'occupation, stating whether their property is their main residence or a second home.
If you filled this out already last year, and none of the information contained in the form has changed, then you do not have to fill it out again.
However, if you bought a house this year, if your situation has changed or for whatever reason you did not complete the declaration last year, then you will need to fill out the déclaration d'occupation this year.
The déclaration d'occupation is entirely separate from the annual déclaration des revenues. The property tax declaration must be completed by everyone who owns property in France, including second-home owners who are not tax residents of France.
Healthcare charges
Healthcare can also be a little complicated for those who have never worked in France - people who have worked in France and then retire here continue to be covered by the French state.
If you have never worked in France, you are still entitled to register within the French system after three months of residency - details on how to do that here - but exactly who picks up the bill depends on your nationality and personal situation.
EU and UK pensioners can apply for the S1 scheme - which means that the country where you were last working reimburses your costs.
Non-EU nationals and those who have taken early retirement may, under certain circumstances, be charged an annual bill for healthcare expenses via the PUMa system - full details here.
Tax on private v state pensions
Countries that have bilateral tax treaties with France usually have provisions so that foreign pensions are not taxed in France. However there can be some confusion when it comes to private pensions.
However, other types of investment packages used for retirement may fall into a grey area.
If you are concerned that you are being incorrectly taxed, you may need professional advice from an accountant to ensure that all your income is being dealt with correctly by the French tax system.
As for the US-France tax treaty, private pensions such as IRAs and 401(k)s are not taxable in France.
Tax v social charges
One thing to check first is whether money being deducted is in fact a tax. You might assume that it is, if it's money being taken by the government, but France has fact has two types of deductions - impôts (taxes) and prélèvements sociaux (social charges).
The latter is roughly the equivalent of National Insurance payments in the UK, they are social charges to cover things like healthcare or unemployment.
Income which is 'tax free' can still have social charges deducted in certain circumstances.
Wealth tax
And finally, it's worth checking whether you are liable for France's wealth tax. You might think you would know about it if you were wealthy, but in fact this tax doesn't only apply to the super-rich.
The wealth tax is a real estate tax and is levied on anyone who has real estate assets (eg property and land) worth €1.3 million or more - including property outside France in some cases.
This is especially pertinent to some members of the 'baby boomer' generation who have seen enormous inflation in property values in their lifetime. People who bought a modest family home back in the 1970s might find that it is now worth €1.3 million if they bought in places like London, south-east England, New York, or the west coast of the USA.
Once you have lived in France for more than five years, your global assets start to be counted towards the wealth tax calculation, which means that overseas property may tip you into the 'wealthy' category.
Find a full explanation of how the wealth tax works HERE.
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