What are the financial implications and benefits of becoming a French resident after Brexit?

What are the financial implications and benefits of becoming a French resident after Brexit?

by | Jul 2, 2024

It would be something of an understatement to say that Brexit brought profound changes to the UK’s relationship with broader Europe. That is not, of course, merely the case on a governmental level; many UK nationals who aspire to move to France, or who may have already relocated to and/or purchased a property in France, have been impacted.

It is actually second-homeowners in France who have been hardest hit by Brexit, with new movers to France experiencing relatively little impact.

Presuming, for example, that you are a UK national who owns a home in France, you may have found yourself frustrated by the strict rules about visiting the Schengen Area. In short, a citizen of a non-EU country (who does not have a visa or residence permit) is only allowed to stay for 90 days (three months) in any rolling 180-day period (six months).

French resident after Brexit

However, this restriction does not apply to foreign nationals with a residency permit, known as a carte de séjour, for France. If you were to obtain this permit, you would be able to enter France with no timing restrictions on your stay; what’s more, you would be able to return to the UK for as long as six months without losing your French residency.

Arguably, therefore, second homeowners could solve their Schengen issues simply by becoming residents of France.

However, the above are not the only legal and practical factors that you will need to consider when deciding whether to become a French resident after Brexit, as there are also financial ones. Plus, it is important not to become confused about the distinction between tax residency and legal residency in France.

Below, I will outline the essentials of French residency post-Brexit, including the potential financial benefits for UK nationals.

What does French residency mean?

As I mentioned above, the term “French residency” refers to the legal status whereby a given foreign national would be able to enter and stay in France, without a restriction on the proportion of the year they can remain in the country. There is an application process to be followed for obtaining a residency card, which I will explain further shortly.

French tax residency, on the other hand, is a status that you may or may not already have, depending on where you fall within the rules. It is not a case of simply choosing where you pay your taxes; you might, then, be subject to the French tax residency rules, even if you think you are a tax resident in the UK.

What are the tax obligations and benefits for UK citizens moving to France?

The criteria for individuals to be considered tax residents in France is set out by the Code General des Impôts. The basic rules, however, are that you will have French tax residency if just one of the below is true:

  • You have your main residence or home in France
  • France is your principal place of abode
  • France is where your principal activity takes place
  • France represents the “centre of your economic interests”.

Broadly speaking, if you satisfy any of the above criteria, you are likely to be obliged to pay tax on your worldwide income, gains, and property wealth to the French authorities. However, only the first two apply in most cases.

Tax residency can unquestionably be a complicated area of law, and you might be unsure of your status if you satisfy a mix of criteria across the UK and France. If this is the case for you, the double tax treaty between the UK and France should help clear up any complications.

If you are a French tax resident according to the criteria, you will be responsible for informing the French Government of this. You will also be responsible for fully declaring all your income and assets in compliance with the requirements.

You might have understandably presumed that there would not be many tax benefits if you were to move to France from the UK and become a tax resident, because many people assume that France is a high-tax country. However, this may be a misconception in some ways.

This is because, while companies and the self-employed do face a heavy tax burden in France, the tax on individuals’ capital in the country can often be moderate or even low. The typical married couple in France, in fact, may well have a lower income tax liability than would have been the case for them in the UK.

Much of France’s reputation as a “high-tax country” is attributable to wealth tax, which no longer exists; a property wealth tax was introduced in its place in 2018. That particular tax applies to those with property assets exceeding €1,300,000, so many UK nationals moving to France will not be liable for it – particularly considering that a 30% allowance applies to one’s main home.

Still, it is always important for UK nationals, who are considering becoming residents in France, to double-check their own situation instead of presuming they will definitely pay less tax in France than they would in the UK. Engaging the services of a tax and investment consultant will help such a UK national ensure they make the most informed decision on their future residence.

How did Brexit affect the right to reside in France?

A major factor determining your residency rights in France as a UK national, will be whether you moved to France before January 2021.

As the UK’s Brexit transition period only concluded on 31st December 2020, if you were settled in France by then (and satisfied the legal requirements for demonstrating this to be the case), you would have had your rights subsequently protected by the UK-EU Withdrawal Agreement.

Under the Withdrawal Agreement, a UK national in the aforementioned situation would have had until 5th October 2020 to apply for a specific residence permit for France. The French authorities did, however, allow late residence permit applications for applicants with a legitimate reason for submitting after this deadline (such as health or professional reasons).

It has, of course, been perfectly possible for UK nationals arriving in France from January 2021 onwards to gain the right to live in the country permanently. However, Britons in this situation are required to go through the necessary process to obtain a residence permit that does not derive from the Withdrawal Agreement provisions.

If this is the case for you, there could be a few different options for enabling you to remain in France for longer than 90 days in any 180-day period. A long-stay visa (VLS-TS), for instance, would allow you to stay in the country for between three and 12 months.

Indeed, UK nationals who intend to spend a longer period of time in France than the 90/180 rule allows, will now need to apply for a long-term visa before leaving the UK. If you are moving to France for the first time, a VLS-TS will probably be issued to you for your first year there.

You must fulfil certain conditions to secure French residency as a post-Brexit arrival in the country. These will include:

  • Having sufficient financial capacity to sustain yourself, and any dependants, without relying on state assistance
  • Possessing comprehensive private health insurance coverage that is acceptable in France
  • Applying for a visa at a French embassy or consulate within the UK, making sure that all necessary documentation is provided well in advance of your relocation
  • Committing to reside in France for the time period the residency permit requires – typically a minimum of 183 days per year.

How is pension and retirement income affected as a French resident after Brexit?

The implications for a UK national’s pension if they are considering residing in France, will largely depend on their specific circumstances.

If, for example, you would be in the 40% tax bracket as a resident of France, you could take advantage of a 6.75% tax rate, which could bring you immediate tax savings of more than 33%. You would also be able to enjoy greater tax efficiency on future returns.

On the other hand, some UK nationals contemplating becoming French residents may only presently receive a relatively modest pension. In this situation, whether or not they are resident in France might not make a great difference to their income tax situation, which might lead them to take whatever approach they are most comfortable with.

Some French residents who have moved from the UK may decide to leave their pension pot in the UK, and to simply draw down income in accordance with their needs. Others, however, may like the idea of having their pension funds denominated in euros, which might give them greater peace of mind while simplifying their financial management.

What are the steps to apply for French residency?

I mentioned the carte de séjour earlier; this is the French residence permit for citizens of non-EU states (such as the UK) who are required to apply for a residence permit either upon arrival or after their first year in France.

You can apply for a carte de séjour at the nearest (sub) prefecture, or – if you’re in Paris – the police headquarters. You will be required to submit some documents and your biometrics, and to pay for tax and stamp duties. Applications can also be made online.

Final Thoughts: being aware of the financial implications will help ensure a well-informed decision

Unsurprisingly, the process of becoming a resident of France for a UK national has become slightly more bureaucratic since Brexit, although not to the degree that some might have feared.

The act of becoming a resident of France after Brexit can certainly bring a variety of financial and tax implications. By ensuring you are well-informed on what these effects would be for you before you seek French residency, you will be better placed to make the right decision for your preferences and needs.

To receive advice and guidance on your own situation if you’re considering relocating to France and potentially applying for French residency, please contact Kentingtons today.

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 Disclaimer: The information in the above article concerning taxation is based upon our understanding of the taxation laws and practises in France at the time of writing. These taxation rules are subject to change and as such, Kentingtons cannot be held responsible for any inaccuracies that may occur. The information in this article does not constitute personal advice. Individuals should seek personalised advice in relation to their own situation.

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