• Income tax forms
  • What does being 'fiscally' resident mean?
  • International Agreements
  • French fiscal residency
• Your step-by-step guide to filling out the form
  • UK private and company pensions, UK state old age pension, pension annuities
  • UK 'government' pensions (armed forces, teaching, university, NHS, diplomatic, local government, civil service)
  • Furnished UK rental income
  • UK interest (bank and building society, PEP and ISA, National Savings and Premium Bond winnings)
  • UK dividends (normal UK stocks and share dividends - usually not all US dividends - and PEPs and ISAs)
  • French furnished rental income (under €76,000 annual rent)
  • French interest
  • French unfurnished rental income (under €15,000 annual rent, otherwise form 2044 is needed)
  • Investment bond withdrawals
  • Capital gains of shares, and PEPs/ ISAs (property capital gains are dealt with on form 2048)
  • CSG
  • Deductions
• Parts, family quotients, 'assessable' or 'taxable' income – understand the system
  • Personal allowances
  • The family quotient
  • Assessable income
  • Taxable income
  • Income tax rates for 2007 income
• To note
  • Income tax
  • The tax year
  • Tax returns
  • Income tax forms
  • When you have to pay
  • Those assessable
  • Key dates

FOR a new resident, determining fiscal residenceis the starting point of everything to dowith taxation, social charges, healthcare,wealth tax, inheritance tax and even howsuccession law can be applied.

It is whether or not an individual is consideredto be fiscally resident in a country thatwill render that person liable to the entirety ofthe tax laws of that country.

It is important to note that fiscal residency isa question of fact, not choice.Every taxpayer is assessable for taxationsomewhere in the world but whether thismeans they actually pay tax is a different matter! Also, different countries have different ways of assessing the same income, so the means in which the tax might be paid willdiffer from country to country.

However, what will generally never change isthe statutory right of the tax authorities of thecountry in which someone is fiscally residentto assess that person for taxation on theirincome, gains and assets - usuallyresulting in tax being due.

However, this right of taxation is notautomatic and whether or not it isapplied may depend on multiple criteria. It is further complicated by the factthat if, for example, income arises inone country, and the taxpayer is inanother country, both countries mayclaim the right to tax that same income.

However, irrespective of the rules applyingto a country, or to the income, gainor asset, a ‘fiscal resident’ is defined assomeone who qualifies to be assessedfor taxation in their country of residency, they then being taxed on their worldwide income, gains and assets.

It is important to understand the ramificationsof being a ‘fiscal resident’ as, in addition to taxation, successions can be affected, as can rights to healthcare and other social security benefits. Once ‘fiscal residency’of a country has been acquired, it is normally retained until it can be shown that the taxpayer has become a ‘fiscal resident’ of another country. Finally, and contrary to popular belief, determining whether or not someone is resident for tax purposes in a country is always based on fact; the status of ‘fiscal residency’ can not be freely chosen at will.

This is why countries have signed agreements to ensure that the taxation rights of each country are clear.

In some cases, an individual having recently moved to France may fulfil the internal residence criteria for two different countries, and this is where treaties can help resolve issues of tax jurisdiction.

These sets of rights are collectively referred to as the “double tax treaties.”

Some treaties are between only two countries but some may be between several consenting countries. The treaties in which these rules are embodied are frequently very long and it is not uncommon that one treaty relates to only one form of taxation, resulting in the need for several  treaties between two or more countries.

These treaties are very important as they are the first (and generally the only) means of establishing which country has the right to tax a person’s income, gains, successions and assets.

Also, as a safeguard, treaties will contain additional sets of rules to be used where a definitive position cannot be reached from the very first rule, or even perhaps the second rule, and so on.

On a more technical issue, although these international treaties are invariably referred to as ‘double tax treaties’ in the sense that their purpose is to totally prevent double taxation, they do not always quite succeed in this. Indeed, there are some instances where two countries might rightly assess the same income and, while double taxation will not result, it is undeniable that the total tax eventually due might be higher than it could have been.

While treaties are generally not perfect in categorically preventing more tax being paid than might otherwise have been the case, they do go a very long way to help the majority of taxpayers settling in new countries achieve fairness in the manner in which they are taxed. It is important to note that a double tax treaty sits above the national law of the two countries, because it will contain the rules to establish which of these countries has the right to apply its national tax laws to establish whether someone is a ‘tax resident’ or not. Furthermore, despite all the rules, ascertaining whether French fiscal residency applies or not is seldom a simple clear-cut exercise as the definitions of relevant terms can be very unspecific, leaving room for interpretation, resulting in it always being best to seek professional advice.

Under the Franco-British Treaty, where a British tax resident moves to France, the first right of seeing in which country the taxpayer is fiscally resident falls to the country to which the taxpayer has moved - France.

As a result, French tax law kicks in, and this states that an individual will be considered to be fiscally resident in France if they fulfil any of the following four criteria :

• they have a home in France (not including secondary residences)
• they spend most of the French tax year in France
• they have their ‘centre of economic interest’ in France (taken to be where income and bank statements, for example, are received, rather than where they are sent from)
• they run a business from France

Immense care needs to be exercised as it is not necessarily any one criterion that can qualify someone as a fiscal resident in France, but possibly an overall view of all the criteria, and hence all the more reason to consult a professional who has the relevant experience.

Forms will be arriving by post this month and will be available online from May 1

By Hugh MacDonald - in collaboration with Micheal Annett of the Annett Consultancy

2007 INCOME tax forms will be sent out across France this month with a submission deadline of May 31.

The Connexion reviews the key forms involved - with a general view of how a former British tax resident should complete their income tax return in France.

It is not possible to cover every individual tax situation so these pages are for guidance only, there being no substitute to seeking appropriate professional advice.

There may be additional matters in your financial affairs which may mean parts of the following information will not apply to you.

The different forms?
There are three main tax forms, each referred to by a four digit number, and sometimes followed by a letter. As several versions of the forms exist for different taxpayers, it is not possible at this stage to confirm all the alphabetical suffixes that will eventually be in use. The following references to forms are based on the ones that are known to be used for the 2007 tax year, but they do not prevent other versions from coming into use.

2042 - the main tax return, which is always required. The 2042 K is for employees of French companies and often arrives prefilled.

2042C - the complimentary tax form, generally for furnished lettings, gains, and foreign tax paid on foreign investments.

2047 - the foreign income form, always required if you have income that arises outside of France, and irrespective in which country the income is received.

First submission
If this is your first tax return submission, then you will need to collect the correct forms from your tax office, or download them from the internet www.impots.gouv.fr and click on the recherche de formulaire title at the bottom on the right. NB - these forms are normally made available online until May 1.

Repeat submission
If this is not the first time you are sending in French tax returns, then it is dependant on local variations as to whether or not all the forms will be sent to you.

You can collect missing forms from the tax office or from the website mentioned above.

The forms are for individual or joint taxation, both spouses or PACS partners needing to insert their details on the same forms.

For cohabitees, joint returns can be made if both partners share the same social security number, otherwise separate returns are required (you should check your cartes vitales for the number).

Before completing the form, it is worth spending some time collating the information and preparing it in the right format for entry onto the tax returns on a separate sheet, which can also be sent with the tax return to assist the tax office.

Each of the following sections tell you information required, followed by the relevant form, page, section and item that needs to be completed.

Note: Examples of the relevant sections of last year’s forms are provided, with letters indicating which sections refer to each item. There may be some changes in this May’s forms.

Note:
Gross = the figure of income before any tax is taken off
Net = the figure of income after tax has been deducted

Declared in total, per person, by country of origin Add together all of the gross pension income (save for ‘government’ pensions - see below) for each spouse, individually.

 A  FORM 2047  page 1 – section I – item 2

Insert the total pension amount for each spouse.

 B  FORM 2042  page 3 – section 1 – item 3

Take your total from the Form 2047 above to box AS

- take the total of spouse’s pension from the 2047 above to box BS.

Declared in total, per person, by country of origin.

Add together all of the gross ‘government’ pension income for each spouse, individually.

 C  FORM 2047  page 4 - section VII - item 2

Insert the person receiving the pension income, the country, the nature of the revenue (pension), and the total gross pension for each spouse; one spouse per line. Total the section, including any UK rental income that has suffered UK income tax (see below).

If it is the first time you are completing this form, and ONLY if you are receiving the UK Old Age State pension, it is worth adding somewhere the comment “non assujettis au CRDS” (not subject to the Contribution Pour le Remboursement de la Dette Sociale - a tax to help pay off France’s social security debt) and including a copy of your E121 Certificate.

 D  FORM 2042  page 4 - section 8

Insert in item TI the total figure of the section above from the 2047.

Declared in total, per person, by country of origin.

Add together all of the rental profits for each spouse, individually, on which UK income tax has been paid.

 E  FORM 2047  page 4 - section VII - item 2

Insert the person receiving the rent, the country, the nature of revenue (locations), and the total profit for each spouse, one spouse per line. Total the section, including ‘government’ pensions, if any, as above (see image).

 F  FORM 2042  page 4 - section 8

Insert in item TI the total of the section from the 2047 referred to in the section immediately above (see image).

Declared in total, jointly, for both spouses.

Add together all of the net interest and winnings for both spouses, from all sources, by country of origin.

 G  FORM 2047  page 2 - section B

Insert the country of origin in column 1 and the total net income in column 5. Total column 5 at the bottom, take the total to line A on the right, and take the total again to line TS.

 H  FORM 2042  page 3 - section 2

Insert in the sixth item down (item TS) the total above from the 2047 (see image).

Declared in total, jointly, for both spouses.

Add together all of the net dividends for both spouses, from all sources (including PEPs and ISAs as these are not tax free in France), by country of origin.

 I  FORM 2047  page 2 - section A

Insert the country of origin in column 1 and the total net dividends received in column 2. Next to the country codes on page 3, insert 11% for the UK (RU, for Royaume Uni, in French) in column 3 and multiply column 2 by column 3 and put the resulting total in column 4.

Total column 2 at the bottom, take the total to line A on the right. Total column 4 at the bottom, take the total to line B on the right. Add lines A and B together and insert the total on line DC. Place the total of column 4 on line TA (see image).

 J  FORM 2042  page 3 - section 2

Insert in the second item down (item DC) the total from line DC of the 2047 (see image).

 K  FORM 2042 C  page 4 - section 8

Insert in the eighth item down (item TA) the total from line TA of the 2047.

Declared in total, per person, from the total rental income received.

 L  FORM 2042 C  page 2 - section C

Insert in the second items down (items NO and OO for each spouse) the total rental income for each spouse. The tax office will automatically account for a 71% expenses deduction, leaving only 29% of this figure as taxable.

Declared in total, jointly, for both spouses, from the forms provided by your bank.

 M  FORM 2042  page 3 - section 2

Insert in what is usually the first item down (item EE) the total of the interest from all bank accounts (see image).

Declared in total, jointly, from the total rental income received.

 N  FORM 2042  page 3 - section 4

Insert in the first item down (item BE) the total rental income for both spouses. The tax office will automatically account for a 30% expenses deduction, leaving only 70% of this figure as taxable (see image).

Declared in total, jointly, from the total ‘chargeable events’ (profit) incurred on the withdrawal.

 O  FORM 2042  page 3 - section 2

Insert in the fifth item down (item CH) the total ‘chargeable gains’ as detailed in the annual documentation issued by both French and UK companies (see image).

However, you should not include:

• the 5% annual allowance on UK contracts, as this allowance is not granted in France
• French contract withdrawals, if the withdrawal has been taxed at source at the 7,5% ‘Prélèvement Libératoire’ rate as these withdrawals go in box DH, the last item in section 2.

Declared in total, jointly, if the total value sold is in excess of €20 000.

 P  FORM 2042  page 3 - section 3

Insert in the first item down (item VG) the total value of the gains (see image).

Where CSG (Contribution Sociale Généralisée - a tax which helps fund the social security system) is paid in the previous tax year, mainly on investment and rental income, at the rate of 8,2%, part of this can be reclaimed in the following year. The amount of CSG that can be reclaimed is 5.8% of this same investment income, claimed as a tax deduction. It is declared in total, jointly, from the previous year’s social charges assessment of this same income.

 Q  FORM 2042  page 4 - section 6

Insert in the first item down (item DE) the amount of the CSG to be reclaimed if it has not already been inserted by the tax office.

 R  FORM 2042  page 4 - section 7

Please note that proof has to be submitted with all of these claims.

UD - donations to organisations helping people.

UF - donations to those organisations not included in item UD, with the possibility to make back claims for years missed, in boxes XS, XT, and XU.

EA - insert the number of children in primary school, or in collège and lycée (in which case use EC) or in university (in which case use EF) that are still supported financially.

GA - for each child, insert any costs of child care (up to the child’s 7th birthday, with reference to age at 31/12/2006).

DF - insert any amount paid to house employees.

DG - tick the box if you have an disabled person’s card, with more than 80% invalidity.

WF - WI - tax credits for environmentally- friendly installations (energy-saving or producing):
insert the amount claimed for the items as required, but note that the cost of items can only be claimed if they are installed by an approved professional and you have full receipts.

The concepts and terms used in French tax may seem unfamiliar. Here we look at key areas you will need to understand.

These do not exist in the way that they do in the UK, but the French system produces similar effects through the use of the “family quotient,” derived from totalling up “parts.” Effectively, therefore, your total household tax-free allowance is the number of parts multiplied by the 0% tax band upper income limit of €5,687.

Each person forming part of a household (therefore of the assessment) is entitled to a “part.” Each adult spouse or civil partner is entitled to one full part, and certain other family members are entitled to a part if they are being supported financially by those being assessed. The first two children are entitled to a half part each, the third child onwards being entitled to a full one. A couple with two children would be entitled to 3 parts, while a couple with three children would be entitled to 4 parts. Half a part is also due to those who are handicapped, and other concessions arise if financially supporting elderly dependent relatives.

Your assessable income is divided by the number of parts (your 'family quotient'), reducing the amount on which tax is calculated. The resulting figure is then multiplied by the 'family quotient.'

Example:
Married couple with two children (three parts) who have a combined taxable income of €60,000.

Divided by three = €20,000.

Of which: €5,687 is tax-free; €5,657 is taxed at 5.5% = €311.14; €8,656 at 14% = €1,211.84.

Total = €1,522.98

Multiplied by 3 = €4,568.94 tax

For French fiscal residents worldwide income is assessable in France irrespective of the country in which it arises, and so has to be declared for assessment in France. While it is the rule that the income actually received in the tax year is that which needs to be declared, further to studies by the French “Fisc” (the equivalent of the British Inland Revenue), an increasing number of French tax offices are instead accepting official confirmation of income from any official source that is issued for use in the UK.

The French have discovered that in declaring annual income over a large number of years, the amount of income that is declared between January and December is, year-on-year and over time, the same as the income that would be declared April to April. As a result, it seems that the “Fisc” have an increasing preference for relying on documents such as P60s (an “end of year certificate” issued to British taxpayers who have been paid through PAYE), annual certificates of interest paid, and UK rental accounts or even UK tax assessments, rather than having masses of paper and schedules showing income assessed in another country all time-apportioned for the French tax year.

Number of 'parts' relating to your 'family quotient' (note: figures for PACS partner or married are total for both members of the couple, who share a form. The term 'partner' used alone relates to a person who lives with a partner, without a PACS or marriage).

See Tax — 2007 income for further information on tax rates for 2007 income.

All French income taxassessable people have to fill out income tax ‘déclarations.’

PAYE does not exist in France. Income tax is generally benign compared to UK income tax.

Income tax returns are issued at the end of April and need to be returned by May 31.

Fortunately, it is possible to collate most of the relevant information in anticipation of the forms’ distribution. Income Tax assessments are then generally issued as of the end of August, depending on the region.

Apart from the three main forms detailed on page 2 (2042, 2042c and 2047), note the 2044, which is for unfurnished rental income above €15,000

There are two ways in which you can pay.

The first is in three instalments in February, May and September of the year after the one in which you earned the income; the other is by paying monthly instalments. The first of the three instalments is due by February 15, and is a third of the total tax paid in the previous year. This same figure is again due by May 15. As the tax return will have been submitted by the end of May, this will enable the final assessment (‘avis d’imposition’) to be issued during August, with a balancing payment being due by mid-September.

This method is mandatory for the first two years of paying tax in France, after which period the alternative method can be chosen.

Note that if you only started earning in 2007 there are no “on-account” payments in 2008 - the full assessed sum is due in September 2008. The alternative method is to pay monthly instalments from January to October, on the 15th of every month, with a balancing payment in November. If, however, the balancing payment is large, the tax office will usually apportion it over several months (even into the following year), but you have the right to set your monthly contributions directly with the Trésor Public.

Jan 1 - Dec 31, 2007 - tax year

End April, 2008 - tax declaration forms issued for 2007 income

May 31, 2008 - tax declaration deadline

Payments:

Feb 15 - 1st on-account payment of tax for previous year’s income (equal to 1/3 of your last income tax payment)

May 15 - 2nd onaccount payment of income tax

September - final balancing payment of actual tax due for the previous year’s income