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TAX

What exactly do I need to tell the taxman about my assets outside France?

The French tax declaration season is now open, but how much do you really need to tell the French taxman about your affairs outside of France? International tax specialist Jason Porter explains some essential information.

What exactly do I need to tell the taxman about my assets outside France?
Photo by PHILIPPE HUGUEN / AFP)

Tax declarations

Every year, anyone who is resident in France (and some non-residents) must fill out the annual tax declaration. Declarations are now open for 2022 – covering your income from 2021.

If you live in France, it’s almost certain that the tax declaration will be compulsory for you, and if you are non-resident but you have income in France (for example rental income from a French property) you will also need to fill out the declaration.

It’s important to note that if you live in France but all your income comes from abroad (eg a UK or US pension), you still need to fill out the declaration. Find the full details HERE.

But the French tax form only covers my income in France, right?

Wrong. This is the source of much confusion to foreigners in France, but actually you need to tell the French taxman about all your assets.

Most jurisdictions operate on the basis that if you are resident, then you declare your worldwide income, and if you are not resident you only declare the income which is actually sourced in that jurisdiction. If that was it, then you could pay tax twice – eg in the UK and France – on the same income.

The Double Tax Treaty between these two states is designed to eliminate this possibility.  As an example, tax paid in the UK on UK rental income is available as a tax credit against the French tax liability on the same income.

Unfortunately, many UK nationals living in France appear to be under the impression they do not need to declare UK source income in France, as they have already declared it (and paid tax on it) in the UK.  This is not the case – all non-French income still needs to be declared on a French tax return. 

The commonest areas of non-declaration are around UK source rental income, UK bank interest and other UK investment income (dividends, etc., from shares and securities in companies and funds).  

In particular, ISAs are commonly missed off French tax returns. Whilst they have tax efficient status in the UK, in France you would “look through” the ISA vehicle, and declare the underlying dividends, interest and capital gains on your French tax return.

What about bank accounts at home?

The French government has recently taken steps to further strengthen its fight against tax fraud, extending the disclosure regulations to also cover non-active bank accounts.

You must now declare all non-French bank accounts and life insurance policies, even if you have not deposited any funds, earned any interest/gains or made any withdrawals. The penalties for failing to declare a foreign account are the same whether it is active or not (and these can be substantial).

This has now become even more real with the CRS (Common Reporting Standards) exchange of financial information between states.  

We are already seeing evidence of French tax offices calling UK nationals in for interviews to discuss their non-declaration of foreign bank accounts, rental income, and capital gains, based upon information provided by UK financial institutions to the French tax authorities.

What are the recent changes about?

This is all happening at a time of a fundamental change in the basis of taxation in France.  

Most other developed nations introduced a form of “Pay-as-you-Earn” taxation many years ago but in France this came in in 2019.

From January 1st 2019 French tax residents have been subject to a monthly withholding tax on their income for that year.  

So do I still have to do the declaration if I am taxed at source?

Yes, for the moment anyway.

This is set to change in the future, but at present most employees still have to complete the declaration – the exception is certain groups whose circumstances have not changed since their 2021 declaration. If this is you, you will have been contacted directly by the tax office, if you have not received a notification you still need to do the declaration. 

When do I need to pay up by?

Tax declarations opened online earlier in April with the deadlines varying depending on where you live in France.

READ ALSO The French tax calendar for 2022 

Any balance of tax due must be settled by the end of the year (penalties will apply for non-payment). Or, where applicable, the tax authorities will refund any overpayment.

If you are an employee and you’ve already had your income taxed at source, you might actually get money back from the taxman if you qualify for any tax breaks or rebates – more details on those here.

Jason Porter is Business Development Director of Blevins Franks Financial Management Ltd.

For more information on the French tax declaration, how to fill in the form and where to find professional help if you need it, head to our tax section HERE.

Member comments

  1. This article was posted two years ago. Is there an update for the 2020 tax declaration?
    Nigel Stubbs

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For members

MONEY

Reader Question: Why did my French electricity bill increase by more than 4%?

The French government has capped electricity prices rises at four percent - but as with many French rules, there are certain exceptions.

Reader Question: Why did my French electricity bill increase by more than 4%?

Question: I read in the media that electricity prices in France are capped at four percent, but I just got a letter from EDF telling me that my bill is going up by almost 20 percent – is this a mistake?

The French government’s bouclier tarifaire (tariff shield), froze gas prices at 2021 levels and capped electricity price hikes to four percent – it remain in place until at least the end of 2022.

However, there are some customers who will see increases to their bills of more than that – here’s why: 

The regulated tariff rate

The French government involvement in price-setting doesn’t just happen during periods of energy crisis, normally regulated tariff prices are updated twice a year: usually on February 1st and August 1st.

Typically, this value is calculated by the CRE (commission de régulation de l’énergie) and it is based on several different factors, which are explained on this government website. These tariffs proposed by the CRE are then subject to approval by the ministers in charge of energy and the economy.

READ MORE: EXPLAINED: Why are French energy prices capped?

These affect the state-owned Engie (formerly Gaz de France), the mostly state-owned EDF and some local distribution companies. Around 70 percent of people in France get their electricity from EDF but other suppliers do exist in the market.

These alternative suppliers, like Direct-Énergie, Total Spring or Antargaz, are free to charge more – but don’t usually charge much above the EDF rates for obvious commercial reasons.

Basic rate

The government-set limit in price rises refers only to the basic rate (option base) for electricity.

This plan represents over 80 percent of the 32 million households connected to the electricity grid in France. So, there is a good chance you might be subscribed to this without even realising it. 

If you are on the basic tariff rate, your bill will not increase by more than four percent this year.

Other tariff options

However, other options for electricity bills do exist, including off-peak rates, green deals and fixed energy prices for a certain period.

Typically people who sign up for these will have been paying less for their electricity in the preceding months than those on the base rate.

However, there are certain special deals that are not covered by the four percent cap, and some users will find that their deal period has come to an end, they are then shifted onto the base rate – which is likely to represent a price increase for them of more than four percent.

It’s little consolation when faced with rising bills, but you will likely have been paying significantly less than customers who have been in the base rate for the past few years.

READ MORE: French government to continue energy price freeze until at least 2023

Kilowatt price

Because most electricity price plans are bafflingly complicated, the easiest way to compare is to look at the price per kilowatt-hour.

Your electricity bill consists of a fixed part, the monthly subscription (abonnement) and the variable part, which depends on the quantity of electricity consumed (in euro per kilowatt-hour, kWh). The latter part is what is concerned by the tariff shield of four percent.

Here is an example of what that might look like:

The mid-August base rate price per kilowatt-hour is €0.1740/ kWh, so if you’re with EDF they cannot charge you more than this rate.

Other EDF plans charge significantly less than that – for example the Vert Electrique Weekend deal has been charging €0.1080/kWh on weekends and €0.1434/kWh on weekdays. 

Bill rises

With the tariff shield, the average resident customer on the base rate will see a €38 rise on their bill this year, while professional customers will see an average of €60 rise. 

Without the tariff shield, electricity prices per residential (non-business) customer would likely have increased an average of €330 a year, according to the CRE.

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