QROPS Riddle As French Move To Tax Pensions

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New French laws calling for British expats have to declare the value of their personal pensions – including Qualifying Recognised Overseas Pension Schemes (QROPS) – have left financial advisers in a muddle.

There are 39 QROPS based in France, but as a favourite destination for British expats, the new law could affect investors who live in France but have QROPS based in other financial centres such as Malta QROPS.

The legislation is one of a raft of measures to tax the wealthy in a bid to plug a 10 billion euro deficit in the French economy and it’s why some of the nation’s wealthiest entertainers and business leaders are fleeing the country to protect their assets.

This is the same law which has forced the actor Gerard Depardieu to leave France for Belgium and be offered Russian citizenship.

In another move to generate much-needed cash, the French government is also looking to increase property taxes on holiday homes.

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Confusion over disclosure rules

The looming reporting deadline of June 17 is for the disclosure of foreign trusts to French tax authorities.

Now, trust experts are saying that there is still widespread confusion over how the new law will affect pensions.

Trustees have to disclose the values of their assets, income and rights on all trusts which have existed since January 1 this year.

Roger Berry, of Guernsey-based QROPS and pensions provider Concept Group, said the new rules were causing a lot of confusion.

“Companies are writing to the authorities asking for clarification but little, if anything, is coming back.”

He said that it appears as if the French tax authorities had not considered pensions to be anything other than something that are provided by employers.

Threat of fines and taxes

This means that personal pensions, whether they are in the UK or QROPS, are not exempt from the regulations and must be reported – unless the pensions is an employer-sponsored scheme and the beneficiary is a genuine employee.

The new rules are complicated but essentially an expat will have to take action if the person who set up the trust and gifted assets into the scheme is a French resident, or if the beneficiaries of the trust are resident in France or if the trust holds a French asset.

Clarification before the deadline is unlikely, and those expats who fail to make a full declaration could see themselves being heavily fined on top of demands for any tax due.

The new rules are part of a wider campaign to clampdown on undeclared wealth in France, but it has just run into trouble following in the wake of the budget minister’s resignation.

Jérôme Cahuzac was tasked with leading the crackdown on tax evaders but did not declare his own holdings in a secret Swiss bank account.

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