It’s been a long time in coming but tax officials in France have finally clarified the rules over whether British expats should pay tax on their pension and rental income.
They say the expats should not be paying income tax in France or make social contributions on their UK rental incomes or government pensions.
The two countries have a double-tax agreement which prevents the same income being taxed twice – firstly in the country it is paid and then when it is received in France.
They have also clarified that the rules apply to the UK income when no tax has been paid in the UK because it falls below the tax allowance levels.
The delay in making the announcement is because, officials claim, they have been analysing the double-tax treaty signed between France and the UK.
Tax treaty
The rules changed slightly last year and France believed it could charge tax and social security contributions on the income with the situation being compounded by the fact that the country’s tax offices were taking up different stances on the issue.
However, the treaty states that the income should create a credit under French tax rules as well as for social contributions.
Now France’s tax officials have confirmed that there is a credit given for incomes taxed by the UK which means that tax and social security contributions in France would not have to be paid.
However, the say there is still an issue on income which falls below the personal allowance threshold which has not been taxed by the UK as this may still be subject to French tax laws.
Until the situation is resolved fully, the French say they will not be taxing or charging social security contributions on this income.
When a final decision is made it will be communicated effectively to all of the country’s tax offices – but particularly to those with high numbers of British expats living in their jurisdictions.
Claiming money back
Until then, people can still amend their tax returns without a penalty being incurred, even those which have been submitted online.
Any British expat with any questions should contact their nearest tax office for clarification.
There is still an issue for the large numbers of expats who have paid tax and social security contributions in 2012 on their UK income and if they will get their money back.
To confuse matters further, expats who contested their tax bills last year saw mixed results with some being reimbursed and others refused.
However, British expats should make a full declaration of their income on their tax forms.
As I have just been taxed on my British Rental Revenue and appealed. It would be nice if you would say where I can find a copy (in French) of this agreement so I can use it in my appeal to the local tax office.
This article contradicts itself. Its says; ‘They have also clarified that the rules apply to the UK income when no tax has been paid in the UK because it falls below the tax allowance levels.’
then it says;
‘However, the say there is still an issue on income which falls below the personal allowance threshold’
so – which one is it? it can’t be both…. and so nothing is clarified – unless they are clarifying that they haven’t made a decision….?