Today is:
Service France
Please note that taxation and property are complex subjects and you should not take or refrain from taking any step without full independent advice on the particular facts of your case. The content of this article is of a general nature and no liability is accepted in connection with it.
* the French taxman
The French taxman has greater insight into individuals' affairs than his UK counterpart, and has at his disposal a wider range of statutory and administrative powers.
The French, it is said, have traditionally regarded taxes as somewhat optional. This attitude still prevails in some quarters; many foreigners will have come across it in the context of being asked to pay under-the-table top-ups in addition to declared property purchase prices, and being assured that this is perfectly normal. (As to which, see our article.) It is in response to this that the government has increased the taxman's authority.
This article presents a brief insight into the French taxman's purview and powers:
Greater insight into your affairs
Every French household (the French are taxed on this basis) must file an annual tax return, even if their tax bill calculated from it is likely (or certain) to be nil.
- Every French household whose worldwide assets' value exceeds, or approach, €720,000, must file a wealth tax return, listing all of their taxable assets and their individual values. The taxman can question valuations. In any event he then has a list of their assets. If, the next year, these assets do not reappear, he asks himself whether they have been sold or given away. Either way, this is a taxable event and he can make further enquiries.
- Your tax inspector is likely to live near you. Unlike in the UK, where you might live in London but your tax office might be in Liverpool, France is organised on a local basis where each inspector deals with the affairs of a few communes, or villages. This means that he is likely to know who is coming and going, and what is going on, and (perhaps) your local is also his.
- French local taxes and national taxes are broadly organised by the same authority. Every taxpayer has a record that states, for example, if he is liable as a resident or a non-resident, and this record is easily accessed and altered if necessary.
A greater range of powers
- Wholly fictitious arrangements, designed solely to avoid tax, can be disregarded by the taxman as an "abus de droit", an abuse of law. This is a wider concept that in the UK.
- Residents of countries with which France does not have a double-tax treaty (e.g. Hong Kong and Jersey) who own properties in France may, in many cases, be taxed on deemed income irrespective of actual income (if any).
- French residents whose lifestyle does not match their declared income or wealth may be required either to justify their standard of living (for example, it may come from legitimately undeclared gifts) or, if they cannot, may be taxed on the basis of a deemed income which is assessed on the basis of a list of assets, including their homes, vehicles, staff etc.
- Non French residents are required to appoint a fiscal representative to guarantee their payment of capital gains tax when they realise a capital gain on the sale of a property.
- There is greater scrutiny of taxpayers' affairs at certain points - for example where wealth is just below the low threshold for wealth tax.
- French resident individuals must inform le Fisc of: (a) their foreign bank accounts; and (b) their foreign life assurance policies (and details of their transactions within them), with their annual tax return.
- French residents can only pay in cash up to €3,000 (lower limits for commerçants). The penalty for breaching this is a fine of up to €15,000 which may fall entirely on the payer.
The best approach
Like the UK, France has plenty of tax breaks available. The best approach is to arrange one's affairs in order to legitimately take advantage of them.
Sykes Anderson LLP can advise on French tax law and administrative procedure.