France is Still a Tax Haven for Expats
Friday 01 April 2011
Despite recent tax increases, France remains a fiscally attractive relocation destination for expats from within the EU and many other countries.
The most fortunate ones are early retirees on government service pensions*, and those who are of retirement age.
Although government service pensions are taxed in the UK, recipients are entitled to the personal tax allowance available in the UK, which for the tax year 20011/12 is £7,475, an allowance that rises to £9,490 for those aged 65+.
Early retirees on a government service pension are not liable for the French social charges in their pension, unlike those who have a private pension.
Whether or not you receive a government service pension, once you reach the age of retirement you are not liable to pay social charges on your state retirement pension.
Those of pensionable age in France also benefit from a 10% allowance before their retirement pension becomes liable to tax.
If you are of retirement age and in receipt of a state retirement pension, neither do you pay compulsory health insurance contributions, as your basic health costs are covered through the E121/S1 exemption certificate.
Early retirees are liable for the health insurance contributions, but you should be able to obtain around two years' free cover through an E106/S1.At the end of two years, in order to obtain access to the health system, you would need to start a business, or pay private insurance contributions until you reach the age of retirement, or obtain five years' residence.
Starting a business as an auto-entrepreneur is a very cost effective way of getting into the health system at little cost. This is because you only pay health and other social security contributions on your turnover; if your sales are low, that will be mirrored in the level of your social security contributions.
There is no minimum turnover requirement to be an auto-entrepreneur, although if you do not have any turnover at all for two years, you cease to be eligible for this business status.
If you happen to be liable to French income tax, then a couple would need to have a taxable income of at least €19,000 before they paid any French income tax, whilst a couple with two children would need to earn circa €30,000.
Remember also that expats relocating to France are also now exempt from French wealth tax on assets held outside of France, for the first five years residence in France.
As far as French inheritance tax is concerned, married couples and those in a civil partnership are exempt between them, and there are generous allowances for children.
*A 'government service pension' is paid to former members of HM Forces, ex Civil Service and Foreign and Commonwealth Office employees, as well as ex local authority employees, police and teachers. National Health service pensions are not considered to be a government service pension.
You can read more in our comprehensive guide to Taxes in France.