The ins and outs of the French Tax system

French tax and finance issue explained, from inheritance laws to self-declared income tax for micro-entrepreneurs and the risks and rewards of investment.

Do adopted children have equal inheritance rights in France?

We have lived in France for ten years, with our four children – one of whom was adopted in the UK before we left. Where will she stand under France’s inheritance laws once we pass on? Will she have equal rights as the other children?

Adopted children benefit from the same preferential inheritance rights (“réserve héréditaire”) from their adopting parents as other children. However, the applicable tax rates may vary depending on the type of adoption.

If the adoption completely severed the links with the original family and is irrevocable (“adoption plénière”), the adopted child benefits from the same tax deductions and preferential inheritance tax rates as other children with regards his adopting parents.

If the legal ties have not been completely severed and the adoption is revocable (“adoption simple”), they will be considered for inheritance tax purposes as unrelated to the adopting parents. A 60% inheritance tax rate will apply. There are exceptions. Preferential inheritance tax rates and deductions apply, for instance, when the adopted parent took care of his adopted child for 5 consecutive years when a minor, or has adopted his spouse’s , or if the child is a Pupille de l’Etat.

Should I hire an accountant when becoming a micro-entrepreneur in France?

I am about to set myself up as a micro-entrepreneur as a teacher of English (private tuition). How difficult is ‘self-declaration’ of income to manage and do I need to hire an accountant to do my book keeping?

It is not a legal obligation for micro-entrepreneurs to hire an accountant to do your book-keeping. Micro-entrepreneurs benefit from less stringent accounting obligations, but have to keep track of all income received. Micro-entrepreneurs initially have to declare their activity via the autoentrepreneur.ursaff website, then declare their turnover on a monthly or quarterly basis online or via the autoentrepreneur Ursaff app – tools which keep the process relatively simple. Your turnover should also be declared on your annual income tax declaration. An accountant may be recommended if you are close to losing your micro-entrepreneur status or have to file VAT declarations. It may be easier to stay below the VAT threshold limits (€34,400 for the provision of services and €85,800 for the sale of goods and accommodation activity) and remain VAT free.

What is risk profile?

We live in France and are looking at our various investment options. What is ‘risk profile’?

When choosing new investments, you should first consider your circumstances, objectives, time horizon, appetite to risk and capacity for loss.

Every set of investments can be forecast to display a given amplitude of risk. Low amplitude, less investment risk but lower likely returns. A higher amplitude of risk brings greater potential returns but higher risk. The key is to find the balance you are comfortable with and ensure your portfolio matches your risk tolerance.

Obtain a clear and objective assessment of your risk tolerance. It is difficult to effectively assess this yourself; you will benefit from third party professional objective guidance. There are some sophisticated ways of evaluating your risk appetite and capacity for loss, involving psychometric assessments and consideration of your assets and objectives.

Please note… All information is based on Blevins Franks’ understanding of legislation and taxation practice, in the UK and overseas, at the time of writing; this may change in the future.

Blevins Franks: The leading tax and wealth management advisers to UK nationals living in Europe

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