Having done my homework on the subject of being a French tax resident, I have a couple of unanswered questions:
Does anyone know whether the midnight rule (as in the UK) applies in France please? i.e. if one is not in France on a particular day at midnight, is it counted towards the “number of days spent in France”?
If the only criteria for French tax residency is the 183 day rule, how likely is it that you will be “caught” if you stays for a few extra days unintentionally? Who is likely to be keeping count?
FYI my intention is to NOT become tax resident in France, just to maximise my time here.
I totally agree with you; if you have your company based in the uk and you're working from France (which I don't read in Sally's original Q) then it's a whole new ballgame with a lot of other taxes, contributions etc. due. In that case one should indeed follow the rules and set your business up in such a way that there's no ambiguity possible as to your tax-residence. But in the case of a private person you can be a bit less zealous but should not overstretch it either ;-)
it was the classic case of commuting between two homes and thinking that she was not 'resident' in France but resident in the UK. She had a UK registered company and worked from her 'holiday' home here - internet based. So many people do this stating it is Europe and they can live/work anywhere. If you have a home in France unless you can state hand on your heart you only turn up for holidays and do not do any work while you are here, then you should declare your income in France, saying where it was earned and where you paid tax/NI.
The point is that these subjects come up regularly on English speaking discussion boards and for the majority of people it is not complicated, it is not a matter of choice, you either live here or you don't. If you live here, you declare and pay taxes and national insurance here, not in another country of your choice - simples!
As to being 'dobbed in' she was told by her solicitor that they were acting on information received and I'm not surprised. Apparently the informant also receives a financial bonus if it is correct.
Please note this is someone I know (actually knew - we don't talk anymore) first hand and not a euphemism for my experience.
Have close experience of someone I know who has been caught by this rule. Two years later she is still attending tribunals etc. Its not pleasant having the Fisc take your home apart. Do not risk it, whats to be gained. This person is now having to backpay several years of back tax and social charges. She thought she was totally legal in every way,, fully up to date with UK paperwork, taxes etc but someone dobbed her in and she has been done in a big way.
Do they count, yes they check all your flight, ferry bookings etc.
Who's likely to keep count? Well at least you are :-)
But that being said, a day is a day, i.e 24 hours, cut-off at midnight. The 183 days rule is just an extra rule when the "normal" tax rules don't give a clear answer.
The UK have an tax-agreement with France since Mai 1968 stating in par.2 art. 3 the basic criteria
- in which country is your usual home-adress located
- in which country lies your principal focus of interests (both professional and family, however horses don't come into the equation)
- the famous 183-days-in-any-fiscal-year rule
and subsidiary (in par.2, art. 4):
-where is your official, permanent address located
- where is your "normal" address, meaning that if your on holidays in France this is not considered as your normal address
- and if everything fails the test, your nationality.
But then again (just in case you're being found out), being considered French or UK for tax purposes doesn't make any difference; as it is stated in that same tax treaty that if a part of your income is taxed in one country, this part is exempted from taxes in the other.
So in my opinion you don't have anything to fear, just don't abuse it and don't talk taxes to your French neighbours, friends etc.
Fair enough. For us, it's actually beneficial being French resident - having 3 nippers, we don't pay income tax twice - only pay in UK and get a tax credit back in France to offset what we would have paid if it had been French income tax. We only pay social charges if they exceed the UK charges which this year wasn't a lot because we get so many 'parts' as a family to offset. It's worked out easier for us to use a French Accountant for our French affairs & as she knows both systems & I totally couldn't be bothered with the hassle of working out the French system. Life is too short!
He happens to be divorced from an English wife and has four children there, so I think he is well placed to play the game and after all, he is a lawyer! He says he moved to the Dordogne because he says there are too many people in what you call the 'grey area', but he describes as living in the 'twilight zone', for the authorities to actually go out to catch them. As he also said ages ago, how long is a holiday and is there any restriction on what you do on holiday?
Hi Brian, :) my accountant would probably say that he is actually putting his 'company' at risk of having an overseas subsidiary & leaving them open to Urssaf charges if they strictly looked at his case. It's fair to say he's living in the grey area - which is fine if you have no dependents and have the means to cough up if you are unfortunate enough to be caught out.
Our kids will go to school in France, our cat lives in France and most our affairs are in France so we declare in both countries - I'd rather not run the risk of being caught (even if we did use a UK address) plus I'd risk being struck off as a chartered accountant if I were caught on the grey side of life :(
I think I'd say - be happy to take your chance but just be aware of what you risk having to pay over if you get caught - that's all.
Suzanne, just asked a French friend yesterday. He officially works in the UK for a UK employer but goes over for about four weeks a year, otherwise works from 'home'. His address here is supposedly his second home although he only stays at his sister's place in London when he goes over. However, it is the address he gives officialdom here so that everything goes there and his sister forwards it here. He pays taxes and all else in the UK. He does not think the so-called 183 rule applies since he is employed, taxed and pays social security, pension (plus private pension) in the UK and has no investments, savings or any financial affairs in France. He is a British qualified solicitor who advises on French commercial law in the UK, so I think he should know. Think you are in the clear.
Thank you Suzanne and Andrew for your replies. I do not earn any income in France, pay UK taxes and the only French investment is our second home. I am considering buying a horse and may wish to stay longer than the 183 days, so am exploring my options. I know I may need to take advice at some stage however thought SFN would be a good place to start.
If for all intents and purposes you're working and paying tax outside france and just using France for "holdays" no one is going to start counting the days - keep quiet and you'll be fine. Finn may give you a more "the rules say" type answer - over to him ;-)
Hi, I thought it was also if one of the following three conditions applies regardless of the 183 days:
It is considered you have your main home in France;
You carry on a professional activity in France, either self-employed or as an employee;
Your centre of ‘economic interests’ is in France, e.g. investments, business.
The general 183 day rule is applied but you would also be deemed to be resident if any one of the other conditions stated above applied. So we spend less than 183 days at the moment but as our main home is France (even though we're currently most of the time in London) we are both French Resident and UK Resident for tax purposes.
Question is - do you do any work from your French home during your time? If so they could consider you 'living & working' in France.
Not sure how likely you would be to get found out if you did go over your 183 days and I'm sure many second home owners do...but best to make sure you know what your exposure to French tax/social charges would be if you did and then decide whether you want to risk it.