Arriving in a foreign country, it is not just the language that changes. (For the record, an April fool in French is un poisson d’avril; literally translated as, ‘a fish of April’!)
In fact, when it comes to the UK and France, almost everything is slightly different; indeed in a lot of cases things are the complete opposite of what we are used to!
Nevertheless, we have to assume that somebody living in or moving to France, is someone who is open to change. This is important if you are to adapt to life in France, and that includes fiscally.
Today, Spring is in the air, we are all hoping to put Covid behind us and make positive plans for the future. Perhaps a change of lifestyle, perhaps even a change of residency?
Our many years of experience have alerted us to the fact that people moving to France often make the same “mistakes”. Therefore, after consulting with my colleagues, I have drawn up a list of do’s and don’ts. We hope you will find it useful and I am confident the below will equally include a few useful reminders for those already living in France.
So, in no particular order, here is our short-list of do’s and don’ts:
Don’t: Move to France without organising your financial affairs in advance.
Do: Take financial advice from an adviser qualified and regulated in France, before moving. It is important to maximise the tax benefits of your country of origin and France. What is tax efficient in the UK, for example, will not necessarily work in France. Indeed, the majority of UK investment vehicles are not recognised in France at all. Nevertheless, as in the UK, in France there are naturally ways to mitigate tax. If you become French resident, you will be assessable to taxes on your worldwide assets; thus it is important to find out how these assets will be taxed, as well as to consider potential alternatives, before moving to France. Such knowledge will provide peace of mind, offering a clear path forward (or not) free from unexpected pitfalls.
French succession law
Don’t: Close your eyes to French succession law.
Do: Take qualified advice. French inheritance law can seem quite daunting and very rigid, but there are solutions to, at the very least, mitigate potential issues.
Understand the residency rules
Don’t: Don’t forget that the UK-France double tax treaty overrules HMRC residency rules.
Do: Make sure you are clear on residency rules. For example, the following is a relatively common misconception. A couple move from the UK to France and after six months they decide to stay. They think they are French tax resident from the period after six months, whereas in reality French residency will start from their original date of arrival in France. As an aside, it is important to note that this kind of “unplanned” residency means the couple will almost certainly lose the means to structure their finances in the most tax efficient manner, having lost their UK tax residency six months prior.
Consider currency transfers
Don’t: Use a traditional high street bank for currency transfers.
Do: Use a currency transfer specialist company. The reason is simple. High-street banks typically have significantly higher currency transfer charges.
Don’t: Simply assume that property is a safe investment.
Do: Ask yourself what will happen to property if/as interest rates rise, or if your tenant does not pay rent. Do not get me wrong, property can be a very good investment, as part of a balanced estate. Like all good investments, it always comes through over the long term, but people tend to forget property too has its ups and downs, as well as administrative headaches.
Don’t: Panic sell when stock markets are down and the media is promoting doom and gloom.
Do: Know your risk tolerance levels before taking on any market based investments. Today we know that returns on cash are, at best, extremely poor and inflation is likely to mean that real returns are actually negative. It is therefore logical to consider taking on some market based investments. However, any such risk should be both reasonable and measured.
When writing this we realised there were enough pointers to fill a very significant book, however, these are the most commonly seen ones. What is abundantly clear is the necessity of careful planning and professional counsel.
This article was first published in the Connexion April 2022