Why France is a Tax Haven for Expats
Wednesday 15 July 2009
France remains a fiscally attractive relocation destination for many, and getting French health insurance is not difficult.
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 tax allowances and reliefs that are available to UK taxpayers. These include the personal tax allowance, which for the tax year 2009/10 is £6,475, an allowance that rises to £9,490 for those 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. Neither do those of the age of retirement pay the social charges on their state retirement pension. Those of pensionable age in France also benefit from more generous tax treatment, with a basic 10% allowance before the pension becomes liable to tax.
Accordingly, if you happen to be on a government service pension, and of the age of retirement, you get the best of both worlds!
This is because you get the personal allowances due to you in the UK and in France, and you are not liable for the French social charges on either of your pensions.
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 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, after which you will need to start a business to get access to the health system, 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 in a single tax year, 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 €18,000 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.