Since its creation in November 1999, over 300,000 couples have “Pacsed” and it has been used to good effect as a financial planning tool for those who wish to combine their finances, but do not wish to get married. With recent changes in the law, being Pacsed has never been more attractive and we have received numerous enquiries as to how this works, thus this article is by popular demand.
What is a Pacs?
A Pacs is a formal civil union between two people, as an alternative for “couples” who do not wish to get married. It is also a solution for two people who merely wish to formalise a household for tax and succession reasons.
Who can Pacs?
Almost anyone can Pacs, i.e. those of the same sex, as well as different sexes. Blood relatives, however, cannot be Pacsed. A couple cannot enter into a Pacs if they are in any other formal arrangement in France or elsewhere. The couple looking to enter into a Pacs must have a common residence and must be over the age of 18.
What are the financial advantages to being Pacsed?
For tax purposes a Pacsed couple will be taxed jointly. This means that income tax will be treated the same way as for a married couple, thus taking advantage of the “parts” system, or “Quotient Familial” which generally results in a lower income tax bill than if the couple were taxed separately.
Further to the law No. 2007-1223, from 22nd August 2007, transfers between Pacsed couples are no longer subject to inheritance tax on death, there is an allowance on life time transfers of €79,221, which is reset every 6 years, and a tax rate of up to 40%, (though this rate is only on transfers above €1,722,041) (see latest tax rates). This does a lot to alleviate the problems suffered by unmarried couples, as before this change, money and assets left to a non relative received an allowance of just €1,500 with the remainder subject to inheritance tax at 60%! This law change gave unmarried couples the right to be treated financially, the same way as a married couple.
What are the financial disadvantages of being Pacsed?
Once you are Pacsed, you are one “foyer” or household, which means that your combined assets are liable to wealth tax. It may be that separately, you are not subject to wealth tax, but with your combined assets, you become liable. If you are already paying wealth tax, it may cause an increase in your liability.
Of course, before deciding against a Pacs for this reason, it is very important to know your potential liability and all the options for reducing or eliminating this tax, since the positives may very well outweigh the negatives.
How to Conclude a Pacs
Many people do the work themselves, with varying degrees of success and stress. Often the best way to start, especially for a foreigner / non French speaker, is to engage a notaire to draw up the contract and deal with its submission on your behalf. This should normally cost around €300.
The paperwork generally required:
A full birth certificate (showing the parents names) – this must be an original, less than 3 months old and translated into French by an “appointed” translator.
A “Certificat de Non-PACS” – a certificate proving that you are not already Pacsed, usually obtained from the Tribunal d’instance in Paris.
An acceptable official form of identity – A Passport, a Titre de séjour, or a French driving licence.
A “Certificat de coutume” – This basically attests to the fact that the person is not already married or in a similar agreement and has the capacity to get Pacsed. This is obtainable from the embassy / consulate. Some countries do not provide these and will merely send you a letter attesting to this fact.
An “Attestation sur l’honneur” attesting your capacity to be Pacsed, that you are not married or part of another similar agreement and a further attestation of your fixed communal residence.
Naturally, if you are doing this by yourself (which we would advise strongly against) a “modèle de Pacs” can generally be found on the internet. We would recommend engaging a notaire, who can guide you through the process and can tell you exactly what paperwork you need, meaning you can rest assured that all has been completed correctly.
If you want to know if a Pacs is the right thing for you to do, a notaire will merely discuss the legal consequences and help you put it into place. Ensuring being Pacsed fits as part of your overall financial planning is something that you need to discuss with a financial professional and naturally, we are on hand to help.