Whether you have already retired to France or are looking to do so, it would be understandable if you saw the process largely in terms of choosing where to live in the country and purchasing a property, rather than necessarily devoting a lot of your attention to the tax and financial aspects.
However, to take such a limited view would be a mistake. The reality is that, while there is no shortage of practical and logistical matters to deal with for anyone retiring to France, the responsible management of their finances should also be one of the very top priorities they have.
Furthermore, it’s something that as a would-be retiree yourself, you will need to keep thinking about – and managing – once you have ‘completed’ your move to France.
We’re referring to such things as tax and estate planning, reviewing your pensions, and ensuring you have the right structure for your investment portfolio – tasks that might not all be very glamorous, but which will nonetheless greatly affect the peace of mind you enjoy as someone who has retired to France.
So, what are some of the key steps that you will need to attend to when it comes to the financial and tax aspects of your move?
Applying for residence so that you can retire to France
One of the most important things that you will need to know if you intend to retire in this part of Europe, is how to secure French residence.
If you are looking to move to France from the UK, you might imagine this to be a more cumbersome process than it would have once been, after the UK’s departure from the European Union (EU). However, as long as you educate yourself on the steps involved before applying for residence, it won’t necessarily be as difficult as you might expect.
In the planning of your retirement, there are two types of residence in France that you should inform yourself about:
- Legal residence, which gives you all the legal rights enjoyed by French nationals in order to live in the country; those wishing to have the right to work in France will need to secure a different visa
- Tax residence, which relates to the country that is entitled to impose tax on your global income, capital gains, and property wealth
British expatriates, aiming to retire in France, should make sure they understand the country’s tax residency rules, to help ensure they provide the right information to the tax authorities in France.
Making sure you have accounted for tax factors before retiring to France
The exact consequences that becoming a retiree in France, will have for your tax situation, will depend on whether you satisfy the requirements to be considered ‘tax resident’ in France. As a general rule, you can expect to be classified as ‘tax resident’ if you plan to live in France permanently from the moment of your arrival.
There is a widespread perception, in some quarters, that whether someone is or isn’t tax resident in France, essentially comes down to how many days they spend in the country each calendar year. However, other factors come into play in determining tax residence, such as the location of the given person’s principal home.
In the event that you do fulfil any of the criteria to be tax resident in France, this will make you legally obliged to declare your worldwide income, gains, and property wealth.
There is certainly scope to reduce your tax liabilities in France; an assurance-vie, for instance, can be a great way to lower your taxable income, without your actual income necessarily being impacted.
It is crucial to appreciate, however, that the financial structures that offer the greatest tax-efficiency in France, can look somewhat different to the most tax-efficient structures in the UK. This underlines the importance of you taking a close look, again, at your present arrangements, and perhaps modifying some of them in line with, what would be, tax-efficient in France.
Structuring your affairs effectively as a property owner
A lot of Britons, who retire to France, decide to sell or rent out any UK-owned property of theirs. If it is the sale of your UK property that you have in mind, you should first seek advice on whether it would be most tax-efficient to do so when you are still a UK tax resident, or whether you would be best-advised to take this action after your move to France.
If, on the other hand, you would like to continue owning property in the UK during your retirement, as a tax resident in France, any rental income will be subject assessed for taxation.
As for if you intend the purchase of a French property, you should be aware that, how you hold the property, could have easily overlooked tax and inheritance implications. For example, in the event of you choosing joint ownership, you will need to decide on the house being owned ‘en indivision’ (tenancy in common), ‘en tontine’ (which is much like having a joint tenancy in the UK), or as an asset included in your marital community. Or you could even purchase through a type of French company known as a Société Civile Immobiliére (SCI).
Planning your estate and inheritance
We’re sure it will already be high on your priority list, ahead of your retirement to France, to take a close look at your estate and what will be passed on to your loved ones in inheritance. However, this area will need particular scrutiny if you own assets in France, given the country’s complicated succession regime.
Don’t presume that inheritance tax and succession law in France have much in common with their equivalents in the UK. Are you aware, for instance, that French succession tax rates and allowances are calculated on the basis of who the individual beneficiary will be, and can sometimes be high?
A further factor is that there is still Napoleonic law in place in France, which was first introduced to protect the family bloodline, and will have the effect of providing your children much greater rights over the inheritance of your estate than your spouse will have.
There is a complex legal picture that has come into play in recent years; in 2015, the ‘Brussels IV’ succession regulation, introduced at EU level, enabling expatriates living in France to choose to have the law of their country of nationality apply to their estate when they pass away.
But on the other hand, there is another piece of legislation, that has arrived since, which may override Brussels IV, potentially allowing protected heirs to make a claim for the share of French assets, to which they would have been entitled in accordance with French ‘forced heirship’ law.
If you want to get around the ‘forced heirship’ element of French law, there are certain strategies that could enable you to do this. But the solutions that will best suit you will depend on your circumstances. Therefore, as always, we would urge you to seek out specialised advice from someone who is well-informed on the laws and tax regime in France.
Reviewing your savings and investments
The way you think about your finances, as a retiree in France, will likely be very different to the situation when you were a working person in the UK. You will doubtless be eager to ensure your money lasts right through your retirement, so that you can enjoy a consistently rewarding life in France.
As a consequence, you will likely have a much lower risk tolerance from a savings and investment perspective than might have once been the case. So, be sure to take the time now to look again over every aspect of your savings and investment portfolio, in case there are lucrative steps you can take that you might not have been aware of.
Factors ranging from the diversity of your portfolio, to the currency in which you hold your savings, will all impact on the effectiveness of your savings and investments as a retiree in France. So, it is a great idea to seek out the expert guidance that will help you optimise your arrangements.
Taking a look at your pension options
Given that you will have spent so much of your adult life putting money into your pension funds, and you will probably greatly depend on those funds for your retirement income, it makes plenty of sense to consider how your pensions are structured, and what steps you can take to maximise your retirement savings.
There are certain loopholes that exist, allowing some pensions to be cashed in, paying an effective tax rate of less than 7%! Naturally, a great deal of care needs to be taken, where loopholes are concerned.
As with everything else we have covered in this article, you should be investigating every option open to you, to help make sure you have the optimal pension arrangements for your retired life in France.
If you are looking to retire to France, and would appreciate specialised and up-to-date advice and guidance on all the above aspects ahead of or following your move here, the team here at Kentingtons is available to provide peace of mind. Please feel free to contact us today through our UK or French offices.