Pelican Consulting sarl

22/11/2019

One way to reduce tax 💶 on inheriting a property 🏡

The laws of inheritance in France are notoriously restrictive and complex.

Paying tax on inheritance will always be a controversial topic. It makes sense therefore to consider various ways to mitigate your inheritance tax liability.

Donation partage is one option which may be suitable for your situation. It is a form of ‘living will’ that enables your beneficiaries to receive value from your assets during your lifetime … whilst you continue retaining the use of those same assets.

Unlike a will which takes effect when a person dies, a donation partage enables you to transfer all or part of your property to your children, for example, during your lifetime.
And so, a Donation partage is potentially an extremely efficient way of reducing the amount of tax paid by your beneficiaries.

Let’s use the example of a 400,000€ property with two children as the beneficiaries.

The rate of tax payable between parent and each child for this property value would normally be roughly 20%, the tax-free allowance per child of 100,000€ being taken into account.

If the children inherited the property under a standard will arrangement their rough total tax liability would be around 40,000€.

However, under the donation partage whereby the parent transferred only the ownership of the property to the children – retaining a lifetime interest – the two children could effectively inherit the property tax free.

Are there any drawbacks to donation partage? Certainly it will not be suitable for everyone as their needs to be at least a twelve year period between the donation and death, and other factors need to be taken into account. It is also important to consider such aspects as, for example, were there to be a need for capital or additional income to fund an eventual nursing home.

So despite some niggles that may need to be considered depending on each individual’s personal situation, there can be significant fiscal advantages.

If you would like to discuss this further please contact us.
Pelican Consulting SARL is a bespoke French-regulated « Conseiller en Ingénierie Patrimoniale » and International Taxation consultancy company, owned by Dr Michael Annett with over 20 years’ experience in France as well as the UK.
Our expertise as wealth management consultants rests in advising on investments and savings, pensions, marital and succession law and international taxation.

👉 Contacts:-
+ 33 (0)4 90 72 33 52
[email protected]
www.pelican-consulting.eu

04/10/2019

Tax changes to the home based employment scheme CESU

The French government has announced its 2020 budget 💶with seemingly bold plans to reduce taxes for households by €9.3 billion euros and businesses by more than €1 billion.

This is the headline detail – however what are some of the other changes proposed?

One concerns CESU or le chèque emploi service universel. Established in 1994 CESU has an estimated 2 million users.

The popular scheme enables a person – a private employer – to claim 50% of the cost of employing someone to undertake various jobs associated to the home; these include looking after children or elderly people, babysitting, small works in the garden/DIY and home tuition. In all, some 150 activities are covered and whilst they may take place outside the home they must relate to the home.

Currently tax payers using the scheme have to enter the total sum paid for CESU activities on their tax return each year.

One change is that from 2019 income declarable in 2020, the tax authorities – the Fisc – will automatically insert the amount paid by the employer directly onto the tax Declaration. This is to reduce the risk of fraud, errors and improve overall efficiency.

Another change will be the deduction at source for private employers starting in January 2020.

In July 2020 two French departments, in Paris and in northern France will pilot a scheme aimed at closing the gap between the date the charges are made and the benefits are applied.

If you would like to discuss further the impact of the tax changes please get in touch..

Pelican Consulting SARL is a bespoke French-regulated « Conseiller en Ingénierie Patrimoniale » and International Taxation consultancy company, owned by Dr Michael Annett with over 20 years’ experience in France as well as the UK.

Our expertise as wealth management consultants rests in advising on investments and savings, pensions, marital and succession law and international taxation.

Contacts:-
+ 33 (0)4 90 72 33 52
[email protected]
www.pelican-consulting.eu

ℹ️

04/09/2019

Catches behind using the new ‘flat tax’ forfeit system for share capital gains

A question I am often asked given the new ‘flat tax’, concerns how Capital Gains on shareholdings are assessed and treated in France for tax purposes, where these could relate to investments in company shares or property-related shares.

Let us begin by stating a simple fact: if you are a permanent resident in France you will need to declare all of your shareholding capital gains to the French tax authorities (the Fisc) along with all of your other income, such as pensions, share dividends and interest.

However, after that, it is not straightforward – and indeed the system was made more complicated in 2013 making the choice of options tricky to say the least, especially as for those taxable in France the eventual gain is then liable to both Capital Gains tax and the Social Charges (Prélèvements Sociaux).

A capital gain is calculated by taking the difference between: 1) the sale price less the sale charges and 2) the purchase cost and purchase charges.

One important aspect to remember, however, is that shareholding capital gains in France are in fact taxed under the income tax system, there now being two options for taxation, one of which is dependent on when the shares were originally bought:-

💶 The Forfeit ‘flat tax' system, which is the new norm: income tax rate is charged at 12.8% and the social charges at 17.2% : a ‘flat tax’ total of 30% on the net gain and investment income; or

💶 The normal income tax banded system which taxes the net gain (and investment income) to income tax and social charges separately. Under this system there is an abatement available for the duration of detention of the shares (applied only to income tax), but only for shares acquired before 2018.

o Shares held more than 2 years but less than 8 years : 50% abatement of the gain

o Shares held for more than 8 years : 65% abatement of the gain

However : the first critical issue to remember is now that in any particular tax year, the Forfeit ‘flat tax’ rate removes the use of all of the abatements (on duration of detention and on income), and the second is that the ‘flat tax' will apply to both investment income as well as capital gains.

There are then two more issues with the Forfeit ‘flat tax’ rate: first, the fiscal effect of the ‘parts’ on the resultant taxable total and, secondly, the possible consequential loss of any age allowances.

So, clearly, deciding on whether the Forfeit ‘flat tax’ system is actually now going to lower taxes due more than the income tax banded system, is, as the French say, « un véritable casse-tête chinois » … meaning that very great care has to be taken in correctly reviewing the options so as to have the most benign tax liability.

Pelican Consulting SARL is a bespoke French-regulated « Conseiller en Ingénierie Patrimoniale » and International Taxation consultancy company, owned by Dr Michael Annett with over 20 years’ experience in France as well as the UK.
Our expertise as wealth management consultants rests in advising on investments and savings, pensions, marital and succession law and international taxation.

👉 Contacts:-
+ 33 (0)4 90 72 33 52
[email protected]
www.pelican-consulting.eu

01/08/2019

⚠️Tax challenges ahead for non-French residents with French 🇫🇷 letting income 💶

The French tax authorities – known as the “Fisc” – have of course a particular way of going about their work, with departmental tax offices interpreting the law often quite differently.

For example the treatment of rental property income from French properties and the liability to pay social charges is a case in point. It has also been a contentious one! Although the Double Tax Treaties should apply, many tax offices in France are applying French tax law creating a real headache for many non-French residents.

In 2019 the French government stated that non-residents who lived in the European Economic Area (EEA) and who are affiliated to a social security system outside of France were not eligible for social charges. However, instead of levying social charges, « un prélèvement de solidarité » was to be charged at a rate of 7.5% and applied to 2018 income; importantly though this solidarity tax is not defined in law anywhere….

As a result, French letting income will be liable to a charge of 7.5%, being the social charges that do not fund social security system organisations.

The Prélèvement Sociaux (social charges) total 17.2% and apply to non-EEA residents with French rental income. The 17.2% comprises of CSG (contribution sociale généralisée) of 9.2% and CRDS (contribution au remboursement de la dette sociale) of 0.5% plus the PS (prélèvement de solidarité) at 7.5%.

We will be taking a close interest on this because if this is enforced, then what is to stop the Fisc levying this 7.5 % charge on all French residents with income currently exempt from the French social charges, such as pension income, foreign rents, government income, US and Canadian income…?

Please contact us for further information. We are fully authorised to advise on French legal and fiscal patrimonial matters.

Pelican Consulting SARL is a bespoke French-regulated « Conseiller en Ingénierie Patrimoniale » and International Taxation consultancy company, owned by Dr Michael Annett with over 20 years’ experience in France as well as the UK.
Our expertise as wealth management consultants rests in advising on investments and savings, pensions, marital and succession law and international taxation.

👉 Contacts:-
+ 33 (0)4 90 72 33 52
[email protected]
www.pelican-consulting.eu

22/06/2019

French tourist rental income

There seems to have been slipped in quietly some changes to the laws on tourism lettings, whether of Chambres d’Hotes or self-contained lets..

The first of these changes is what the title now actually covers, and the new definitions cover :

chambres d’hotes - only the provisions of rooms, effectively a bedroom, in someone’s property.

furnished tourist lettings - essentially anything more than a chambre d’hotes, such as a holiday suite, apartment or even property

The second change is that the notion of a habitual activity is introduced, and if this is applicable, either on an annual bais or during a tourist season, then the activity is of a commercial nature, and this requires registration with a centre de Formation des Entreprises.

The third is for the business social security charges :

- the lettings of chambres d’hotes are exempted and social charges continue to be levied at 17,20% for French residents

- for furnished tourist lettings, business social charges are due if the annual income is in excess of 23 000€, and this also requires registration of the activity as a business

For income tax, the taxations rules have been simplifies and now are :

chambres d’hotes - allowance of 71% and so only 29% of the income is taxable

furnished tourist lettings - allowance of 50% and so 50% of the income is taxable

For VAT, currently seasonal holiday lettings are exempt from VAT

22/06/2019

Non-French residents having French letting income

The Fisc issued a statement for the 2018 year of income of the liability to the French social charges.

This states that European Economic Area (EEA) residents who are affiliated to a social security system outside of France but within the European Economic Area will be exempt from the French CSG and the CRDS.

As a result, French letting income will be liable to a charge of 7,5%, being the social charges that do not fund social security system organisations.

But !!! The social charges are levied at 17,20%, and the CSG and the CRDS between them amount to 10,40%, so leaving 6,8%. So if the French Fisc are levying this charge at 7,5% … does this include social security funding and so would make the charge illegal ?

This charge is being referred to as « un prélèvement de solidarity » but is defined nowhere !

If this succeeds this year, then what is to stop the French Fisc levying this charge on all French residents and on income currently exempt from the French social charges, such as pension income, foreign rents, government income, US and Canadian income ... ?

Legal help someone … please !!!

18/07/2018

Careful ... social charges change on next tax assessments for non-residents and residents ... ... ... !

04/07/2018

Are these new French fiscal charges legalised theft?

It is sometimes said, "The best things in life are free, but sooner or later the government will find a way to tax them." As the impact of major changes to French taxation agreed last year start to bite, it certainly feels like that at times.

How does it affect you in 2018?

The French budgets agreed by the Assembly, increasing the burden of taxation of mostly ‘unearned’ income, contain a number of significant changes and in this newsletter, we will focus on two: changes to the treatment of rental income and social charges. The new tax laws affect everyone with certain types of income, both permanent residents and those who live outside of France.

The policy is a significant fiscal shift and an unwelcome one for our clients.

As a result, the Contribution Sociale Généralisée (CSG) has been increased by 1.7% to 17.2% for income earned and capital gains from the 2017 income tax year. Furthermore, some of these the social charges will now be applied to the French rental income of non-residents, as they will be to the foreign rental incomes of French residents.

In addition, the French Fisc, due to incorrectly applying the terms of the UK/France Double Taxation Treaty is creating liabilities to some of the social charges on incomes which are not subject to taxation in France, such as Government incomes.

As a result, because some of these social charges no longer fund the French social security system in any way, it also raises the question as to the validity of their deductibility against those having foreign tax liabilities, such as those who fall under US taxation

What’s more, most will see an increase in taxation on French rental incomes as the rules on rentals have been completely overhauled for 2017, pushing most people into the 50% abatement bracket for expenses, and creating additional obligations and liabilities.

So, you can see that these highly regressive changes will hit many of us in our pocket… If you would like to discuss how we can use our professional experience and knowledge of the French tax system to explain the impact of these new tax and social charges and options, please contact us.

Pelican Consulting SARL is a bespoke French-regulated « Conseiller en Ingénierie Patrimoniale » and International Taxation consultancy company, owned by Dr Michael Annett with some 30 years’ experience in the UK and France.
Our expertise rests in advising on investment and wealth management, savings, pensions, protection of the person and international taxation.

Contacts:-
+ 33 (0)4 90 72 33 52
[email protected]
www.pelican-consulting.eu
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29/06/2018

Download our free mini-book on Wealth Management in France

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08/07/2016

Avec la presse internationale d'aujourd'hui il est incroyable de voir la panic causée à cause du manque d'avance de la Grande Bretagne sur l'application de l'article 50 ! Monsieur Cameron a dit clairement que ce n'était pas à lui de l'appliquer mais au nouveau Premier Ministre ... qui ne sera élu que le 8 septembre prochain.

Ainsi rien ne peut ni pourra être fait avant le 8 septembre ... alors patience !!!

23/11/2015

http://fr.reuters.com/article/topNews/idFRKCN0TC17120151123 Minister for the Economy, Emmanuel Macron announces plans to help tackle late payments to companies - particularly to assist the SME sector. Do you think this will help businesses or are the plans insufficient?

PARIS (Reuters) - Emmanuel Macron a annoncé lundi un renforcement des sanctions contre les entreprises coupables de retards de paiements à répétition pour enrayer une pratique qui fragilise le tissu français