Tax-free Savings and France

There are various tax-free vehicles available in the UK for UK residents. For those of us that loathe paying tax where we don’t have to (is that everybody?) we can look at using our money to produce returns that help line our pockets rather than those of the UK tax man. But what happens when we move to France? Do we retain these accounts? Will they work as tax-free savings vehicles for us as French residents?

Premium Bonds

There is no law to say you must cash in your premium bonds (or any other UK savings or investment products) on moving to France. However, the French authorities do not recognise premium bonds and do not offer an alternative in France. Therefore, any winnings could be considered as interest and would be declarable on your French tax return. The winnings would be liable to income tax (at your marginal rate) and would also be subject to social contributions (at 15.5%). If you become a millionaire winner, the taxation implications in France may prove to be burdensome and on smaller wins, this could prove administratively painful. The beauty of the premium bond is that it can be cashed in at any time without penalty.

National Savings Certificates

These have a term of usually between one and five years, depending on the interest rate obtained. In the UK any interest earned on maturity is paid free of tax, but, if the certificate is cashed-in early there is usually loss of interest. In France, the tax treatment will be similar to that of a fixed term bank deposit bank account. Once the interest is paid, it must be declared on your French tax return and will be liable to both income tax and social charges.

Cash ISAs

These are one of the simplest tax-free accounts available to UK residents. Interest is paid on the account without tax deducted and no tax is payable on closure of the account. However, as a French resident, the interest must be declared on your annual French tax return. The interest will, once again, be liable to income tax at your marginal rate and social charges at 15.5%.

Stocks & Shares ISAs

Another tax efficient savings vehicle for the UK resident, although perhaps not as tax efficient in some respects as one may assume. Dividends are paid less 10% tax, which is not reclaimable. So for those out there who range from the non tax payer to the basic rate tax payer, there is no tax savings made on dividend income! For the higher rate tax payer and those liable to capital gains tax, the saving can be more substantial. But these investments do not confer the same benefits to French residents. Dividends from collective investments are taxed on their full value, therefore, equity ISAs are considered as investment funds and taxed as such. The dividends are also liable to social charges. Any capital gains on the sale of these investments, as a French resident, will be taxed at marginal income tax rates plus, of course, the 15.5% social charges The above savings and investments are designed for UK investors paying UK tax. UK investments are not, therefore, designed for French tax payers.

Currency

France has a series of tax-free deposit accounts where the amount you can invest is severely limited and the interest rate is set by the Government. There are then other accounts which are “tax efficient” providing partial relief from taxation under certain conditions. It is relatively straightforward in France to protect investment income from tax, especially if you do not need it, by using certain types of investment. Professional advice is invaluable and if sought before your move to France could provide the opportunity to mitigate your future tax liability in France and offer the potential for capital growth

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