Cross border / frontier working and Tax

Banking & Financial Tax & Social charges
1

I’m staring a thread on Cross-border working taxation. Thought it best to have it as a separate topic, coz the tax issues won’t be just for 2021 , (though got to do the first return for December 2020.

Cross-border health and S1’s have I hope been well covered in my thread Health insurance proof before WA deadline- my duck is not quacking

(admittedly not the clearest title)

and another started by @robwebber
https://www.survivefrance.com/t/cross-border-workers-and-healthcare

Rob – hope your S1 ducks are coming home to roost :blush:

There was also another thread from 2017 very much self-employed but the poster decided to set up as micro-entrepreneur.

https://www.survivefrance.com/t/cross-border-working

In this thread I would like to reach out for advice and guidance from UK cross border workers residing in France who have done tax returns?

Now I am UK employed, but I / others would also be interested in self employed advice, not least because moving from full time to part time might also be on the cards for many people as they ease into France life?

Particular questions are –

When declaring the UK employment income in France can we, as KPMG suggest, deduct 10% of the gross salary and the UK NI contributions (yes I have the S1 and reducing the UK earnings declared will help limit pushing my UK pension taxable in France into higher or stratospheric tax bands!)

Any other allowances allowed – e.g. travel (not that there’s any of that at the mo)

Etc…

Also any help with what to do with HMRC will be VERY welcome – I spoke with a ‘specialist’ and she advocated the SA109 – but looking at it, it doesn’t seem to apply, coz obs. I’ll be in the UK more that 16 days in the year commuting? Looks more like a dual tax resident situation?

And any other stuff us frontaliers may find helpful – e.g. updates on the social security suspensions remote working limitations / commuting requirements etc.

Thanks!

2

Good post, this is one area that a lot of Brits are very unclear about. I must have at least a few a week that tell me that they ‘work from home for a UK company’ which is not as simple as people think as it is not allowed under French employment law.

French employment law is a complicated subject and worth speaking to a professional to make sure you aren’t falling foul of the labour laws (fines can be very large). The general premise is that if you are living and working IN France then you need to be in the French system and paying your social contributions and taxes here. Here are some links that explain some options:

http://www.sedigroup.com/uploads/Docs_centre/FR-URSSAF-Bas-Rhin-Guide-RFE-for-foreign-firms-in-France.PDF

3

This is brilliant thread to start, thanks - am
just in this situation now !
Is it very onerous for UK employer to have employee working from France ?

4

Hi Dave
yes, its such an important topic to cover.
ive not submitted any tax return to france yet, and if im honest - i just dont know how to !!
or when i have to do it.
im stuck in the uk at the moment, but back to france at the end of March hopefully…im excited to see my S1 in the post box !! maybe…

im self employed, i run a small business in the uk employing 2 people…one of which is my wife, who obviously lives in france with me…
we are still waiting for our appointment to obtain the CDS…
eventually we wish to set up in france as a micro enterprise, to run a B&B from our house in Olonzac 34. so we want to make sure we get every duck in a row as we need to.
look forward to hearing from others, and contributing our personal progress.

5

Hi @georgia_shriane

Tory’s @toryroo comment about confusion over ‘work from home (in France) for UK company’ is spot on. So here’s some thoughts on situations…

Cross-border working is characterised by regular daily or weekly commuting - e.g. train or fly to UK Monday, come back Friday. Income taxed in UK, declared in France. Working at home in France for UK company is remote working - taxed in France only.

So, in the former situation, not onerous at all for the UK employer, because nothing has changed.
In the second situation - the potential to be fairly onerous as employer would need to set up France presence to pay your salary. I say fairly coz some of the Ursaff stuff seems fairly Ok for small employers less than 15 or 20 I recall.

I also say potentially coz. here’s the rub - due to Covid, all the rules about decisions on whether work is cross-border seem suspended at the moment - time spent in France working during the pandemic ‘measures’ will not count to the time used to assess France contribution requirements. I’ve posted several links to relevant articles / declarations, e.g. I’ve seen an article from one of the CPAM sites saying this will continue to be the case till June. Quite possibly it will continue beyond that!

Of course one day the commuting suspensions will end and then perhaps it will revert to what was before, or there might be a new ‘new’. In any case, I think in France assessment of the 25% maximum ‘telecommuting’ might be over a year period - according to the OECD anyway. Probably best if someone can find a tax bulletin or some other Impot guidance…

Also RIFT does say it’s trying to get more clarification here on different working patterns - also I saw the UK had something about a two week commuting pattern (travel every couple of weeks) so it doesn’t seem to be set in stone. Possibly the key thing is ‘regular’ - but that would prevent people like the 2017 thread who travel to the UK as and when to do work only in the UK.

So work away at the moment! - you have no choice - I’ve just checked on the UK travel exemptions site and the general cross border workers category has now been removed. There’s also a ton of stress now made on ‘if you can work remotely, then you must’.

And I feel there shouldn’t be a difference between employed and self-employed but I suspect it is much much easier to make a case to HMRC if you are a PAYE employee with NI contributions - note for the S1 they ask if you are a director - presumably to look into these personal service Limited Co’s set up to disguise self -employment?

Hope that helps - now back to the day job!

6

Tax is one thing. Where would you pay your social security? If you pay NI in UK, I guess you would also be expected to pay social security in France since you would have to declare your income for tax purposes. So both NI & social security?

7

Hello Peter,

I can answer that! EU social security co-ordination rules - workers only pay into one social security system. If only cross border working in UK then that’s UK NI. If you also work in France, then the UK sends a letter asking France to decide which state you pay NI into (as part of the S1 process). My feeling is that if you work a bit in France then it will be France social security. There’s rules to decide - you cannot choose. Haven’t looked into what they are.

1 Like
9

Hi All

so true to form our S1 arrived today - a miracle i think, considering the issues others have had.
one issue is that it has a mistake…they have my wife down as a dependent !! when she is a frontier worker in her own right…so a quick call, and they said that they will re issue…
the form said i must take it to “local sickness insurance office”…
can anyone please tell me what that is ?? is it the doctors in our french village ? or somewhere more formal.
thanks all.

10

No, it is your local CPAM office or caisse. Go onto Ameli.fr they will ask for your postcode and then tell you which caisse, and you can get the address.

1 Like
11

Thanks Jane; very helpful.
ill be planning a long drive to Montpellier once i receive the amended S1’s

12

Dave could you give any info as to where the details about the 10% deduction from gross UK income mentioned to you via KPMG can be found? if 10% could be taken off on French tax return, as you say, this could make it easier to firmly be in a lower band.

So any info about the basis of this 10% and where to declare it would be very helpful?

13

@KarenLot

Hi Karen. That’s odd - you did a post but i didn’t get an e-mail which usually happens - sorry for any delay.

Here’s the KPMG link.

France - Income Tax.

Scroll (a long way) down to ’ General deductions from income’

Key points - it’s dated quite old (but had some recent tax bands so maybe other stuff has been reviewed) and talks about France earned income but I think here it might be talking about foreign income coz it also says to deduct the NI.

And I communicate with someone on SF who did have UK income - and they did deduct and have accepted the 10% allowance. Only thing perhaps muddying the waters is they didn’t deduct NI coz the UK decided they wouldn’t be charged - I think possibly they already had the state pension. I’ll have to check our last comms.

And I think pension contributions are also deductable though not yet sure to what extent - I’m whacking in additional conts. to the personal pension as much as I can in preparation for the 7.5% tax rate- it’s now my house fund.

I have to say I’m a little underwhelmed by the response so far from those who have obviously done all of this before (my prior mentioned SF interlocutor excepted - they have been incredibly helpful and in massive detail).

Surely you, rob and I can’t be the only frontaliers on the site declaring to France tax authorities? Perhaps we are, and everyone else either works in France or is retired!

At some point pretty soon we will all be down the fisc to discuss what exactly is available to deduct, so I’m hoping we can all post the results to share !

Regards Dave.

14

Ah.
Thanks Dave.

I guess you’ve spotted that newsstands (incl in largeish supermarkets) have been sprouting the annual “tax guides” that some magazines produce as special editions, since March.

I thought the 'Vos Impots" one, though turgid, looked about the best. 60millions and, I think, Que Choisir, produce one too.

There are professional ones in the Finance/Business section of online magazine service Pressreader. I think the professional ones may be forward looking - i.e.perhaps tell us what we do now that could be eligible to reduce our tax when we do the declaration next year. Whereas the one I’ve just paid 6,90 euros for at the supermarket, Vos Impots, and the other 2 I’ve mentioned, are about filling this year’s declaration for last year.

I received the one for 60millions free by post last month. It had been promised as a freebie with an annual subscription to the main 60millions magazine I took out for 24 euros last year. (So net about 18 euros for the magazine for a year).
The 60millions one is good on a quick scan and possibly easier going. But Vos Impots seems to have a bit
more depth - closer to the KPMG level I think.

As I think you are right about the KPMG possibly not being the latest rule, it looks like I am going to have to actually read the Vos Impots later this month after trying to progress my CPAM and CDS. Luckily my tax affairs are simple in either country.

15

I came across this and thought might be relevant to frontaliers…

And for Karen, if your tax affairs are fairly straightforward then a straightforward approach could be all you need. The off putting part of the French tax return is all the pages of numbered boxes. If you work through a simulator (like the one posted on the online tax thread) you can identify which boxes relate to which bits of your income. I then fill in those boxes and basically ignore the rest.

16

thanks Jane. have bookmarked.

17

Possibly making headway on declaring UK employment income but much remains…

From 2020-21 declaration guidance: (page 117) (I posted the link Ifound on general pensions 2021 thread):

EXEMPTED SALARIES AND PENSIONSFOR THE CALCULATION OF THE EFFECTIVE RATE

Exempt wages and pensions from foreign sources

If you are domiciled in France and have received salaries or pensions exempt from income tax in France but retained for the calculation of the effective rate, you only have to complete lines 1AC or 1AH and following, page 1 of 2042 C , that whether or not you had other foreign source income. If you do not have other foreign source income, you are exempt from subscribing to a 2047 .

Salaries must be declared in lines 1AC to 1DC after deduction of compulsory social contributions and after deduction of tax paid abroad. Also declare lines 1AC to 1DC the amount of compensation daily sickness days.

Now the lack of having to do a 2027 is neither here nor there for many I imagine as there will be UK interest and possible rent to declare. Compulsory SS contributions would be UK NI?. But what haven’t seen before is to deduct tax paid abroad? Here is the french wording and I suspect google translate is not quite doing the job here… for the words ‘imputation’ and ‘acquitte’ - it’s different to the ‘deduction’ of cotisation sociales…

Les salaires doivent être déclarés lignes 1AC à 1DC après deduction des cotisations sociales obligatoires et après imputation de l’impôt acquitté à l’étranger.

For UK taxed pensions it has -
Pensions are to be declared lines 1AH to 1DH for their amount net received after deduction of foreign tax.
Les pensions sont à déclarer lignes 1AH à 1DH pour leur montant net encaissé après déduction de l’impôt étranger.

Again, note the different wording here ‘deduction’ not ‘imputation’ (but the same english word from google translate) - I wonder if for salaries, it is to deduct the tax calculated? (not the actual tax???)

The guidance section completes with - 'This income (after application of the standard deduction of 10%or deduction of actual employee costs) will be used for the calculation of the effective rate applicable to your taxable income in France and for the determination of the reference tax income. [which we knew]. If you have, in addition to your wages or pensions, other income from foreign source, purchase a 2047 . Indicate on the 2047 and line 8TI of 2042 C only these other foreign income.

I tested this on the ‘full’ tax simulator and it calculated exactly to my spreadsheet I have for calculating the ‘fraction’.

Comments and thoughts? - some SF’s MUST have done these declarations before surely?

Also what is missing is

  • what to do with employer pension schemes’ régimes de retraite supplémentaire’, - are these also 'cotisations sociales obligatoires ’ (these schemes are obligatory in France, but no pension is ‘obligatory’ in the UK, but otherwise the modus operandi fits) (Article 83 group pensions); and

additional personal pension contributions - these seem to be similar to PER’s (the new PERP) - they can be deducted from France salary to 10%, so could one deduct the UK personal pension scheme up to 10%? It would be great if one could deduct the total contribution!

18

For the sake of completeness for PER it isn’t exactly 10% of income - there are differing explanations on the internet, but from good old:

you can deduct from your taxable income for a year the sums you paid into the Perp during the same year.

For payments made in 2020, this ceiling is equal to the higher of the following 2 amounts:

10% of professional income for 2019, net of social contributions and professional costs, with a maximum deduction of € 32,909 ,

€ 4,114 if this amount is higher.

19

Can I just check - eg if you received 15k of salary in UK and had 2.5k in tax deducted and 1k National Insurance would you declare 15k, 12.5k or 11.5k as Salary?

Thanks

20

That’s what I’m trying to check too! On the face of it it looks like it!

A big question is what constitutes the tax taken off - ! What’s on your payslip? Or what’s in your tax return -and if you had rent also in your tax return would you apportion the tax? (That could chime with the France effective tax rate approach?)

And what about the employer pension? Would that be under NI ? (on the basis it’s all pensions). And what about the personal pension - would that also then be taken off.

I’m wondering whether to propose an approach to take the gross, deduct the NI, deduct the pensions, then do the UK tax calculation then deduct that result. Possibly apportion the personal allowance across the UK taxable sources.

Should one should strip out working at home / Covid relief because that would be part of the automatic 10% working expenses France deduction? Should one add any employer refunded expenses covered under the 10% France allowance as per the France guidance?

21

Update - just realised that wouldn’t work at least strictly because the relief is applied to the pension at source - I’ll need to think that through some more.

This all presupposes the tax office will agree one is declaring one’s income net of pension contributions (= UK NI and employer / personsal pension) and tax. On the basis pension contributions are relievable in UK therefore cannot be added to the France fraction otherwise they would be being taxed in France?