Cross border / frontier working and Tax

Banking & Financial Tax & Social charges
22

If you are permanently tax resident in France you will have to declare your gross income and specify whether you have paid tax in the UK or not.

There is a taxation treaty between the UK and France which spells out how tax (and I think NI/social contributions) are treated so you don’t end up paying twice as much tax.

But you really need to speak to an expert who can advise you on both sides of this. If you can’t find such an animal you will have to take advice from a UK and a French expert and make an informed judgment.

Both the HMRC and the Impots here in France have an obligation to provide you with best advice, So talking to both organisations and explaining in detail your situation would be a good start.

23

I think as a principle you have to declarr everything gross in both countries. Then in each country take off whatever allowances that particular country will give you. Obvs declare tax amount deducted at source in the box for that.

As a frontalier whose employer and work is in England, and who does not work in France only lives in France, so presumably one of the very few categories still eligible for an S1 this would mean your social security contributions are paid only in the UK.

In the above situation I would possibly claim the work at home allowance on my UK tax return. But would not claim any such allowance on my French return as that would mean I was working in France therefore incorrectly open the door to extra charges/cotisations! Not sure if this is correct thinking.

24

Karen –I think you’re right just to leave WAH allowance out of a French calc – (I think) it’s only if you’re actually paid it by your employer would it figure in France as income outside of the standard 10% expenses deduction.

On tax deductions, as far as I can see, one deducts them from the salary before entering the figure in the box. The 1000’s of euro question (for me) is what else to deduct pension wise from the France figure!

25

Also I’ve found different approaches expressed on exempt salary (and pension payments) -also mentioned in the 2020-21 tax thread. Basically about entering them only in the 2042 and also I have found discrepancies about deducting the tax from salaries (and pensions). Firstly the guide for revenues etranger -

On deducting the UK tax paid from the gross it states:

The fact that this income has been subject to taxation or levy in the State or community from which they originate you do not exempt from declaring them in France. When such tax or such levy has been made, in accordance with the applicable convention, the tax paid outside France is not deductible from income.

And on where to enter them, (and again on deducting foreign tax)

Vous devez déclarer ces revenus sur la 2047 pour leur montant après imputation des charges

You must declare this income on the 2047 for their amount after charging of charges (salaries and pensions must be declared before the standard deduction of 10% or the deduction of actual costs for salaries), without deducting the tax paid to abroad, and complete box 6. You must also declare these amounts of income in the heading corresponding to their nature and postpone their total online 8TK the 2042 C .

The French for ‘charging of charges’ is “Vous devez déclarer ces revenus sur la 2047 pour leur montant après imputation des charges.” (I for one do not know what might be meant by ‘charges’.)

Then on page 3 same document has (for where to declare):

Exempt income used for the calculation of the effective rate must be declared on the 2047 , box 8 when it comes tonues other than wages and pensions. These revenues must then be transferred to the 2042 C , line 8TI.Exempt wages and pensions taken into account for the calculation of the effective rate must be declared directly and only1AC lines or 1AH ff of the 2042 C .

Here’s the French for the 1st part of the para as google translate does its own thing here,
“Les revenus exonérés retenus pour le calcul du taux effectif doivent être déclarés sur la 2047 , cadre lorsqu’il s’agit de revenus autres que des salaires et pensions .

So the France guidance is managing to contradict itself even in the same document! That makes me wonder if something else might be going on here between the different salaries – but if so what – and the pensions aren’t different?

The foreign tax tax deduction treatment in the guide etranger (and which boxes to fill in) is directly contradicted in the previously posted salaries guide

https://www.impots.gouv.fr/portail/www2/fichiers/documentation/brochure/ir_2021/pdf_som/06-traitements_salaires_91a118.pdf#Page=1

From 2020-21 declaration guidance: (page 117 of the main guide)

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.

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 .

Also, incidentally here, , as mentioned in the 2020-21 return thread, for pensions, 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.

26

I’ve found the France tax bulletin for salaries – I think the tax inspectors consult these? Now I’ve put together my arguments on pension deductions - if anyone has already made any of these arguments and had them accepted (or not!), or just done these deductions I would love to be armed in advance, and doubtless loads of others might be grateful. Or even just a critique of my reasoning?

Appreciate there may be elements of confidentiality. PS I got a ‘do one big post’ message but this is slightly different to tax deductions above, being pensions, and on it’s own is probably to big already.

https://bofip.impots.gouv.fr/bofip/2216-PGP.html/identifiant=BOI-RSA-BASE-30-20120912

RSA - Tax base for salaries, wages and similar income - Charges deductible from gross income

The net amount of taxable income is determined by deducting from the gross amount of sums paid and benefits in money or in kind granted, certain social contributions, certain interest on loans and the costs inherent in the function or employment.

Since the taxation of income for 2004, the provisions relating to the deductibility of contributions or premiums paid for retirement have been modified.

The following will be examined successively:

  • chapter 1: Contributions to a retirement or provident scheme ( BOI-RSA-BASE-30-10 );
    (there’s links to other sections)

For pensions we have

1 - Employees are authorized to deduct from the gross amount of their remuneration, under the conditions set by Article 83 of the General Tax Code (CGI) , the contributions they bear in order to protect themselves against the various social risks;

I. Unlimited deductible contributions (article 83, 1 ° and 1 ° -0 bis of the CGI)

5 For a detailed discussion, see BOI-RSA-BASE-30-10-10 .

10 The following are deductible without limit from the gross remuneration:

  • social security contributions (general scheme and special schemes, including contributions paid to foreign social security schemes by employees remain affiliated in their country of origin or, under certain conditions, by frontier workers in accordance with the provisions of the regulation (EC) n ° 883/2004 of the European Parliament and of the Council of April 29, 2004 or to the stipulations of a convention or an international agreement relating to the application of social security schemes);

So far so good, if pensions are social security schemes (and why wouldn’t they be, hey?).

However, with the detailed discussion, BOI-RSA-BASE-30-10-10 .

https://bofip.impots.gouv.fr/bofip/2247-PGP.html/identifiant=BOI-RSA-BASE-30-10-10-20120912

RSA - Tax base for salaries, wages and similar income - Deductible expenses - Unlimited deductible contributions

II. Special case of the deduction of contributions paid to foreign social security schemes

A. Border workers

  1. Since June 1, 2002, the social security coordination rules provided for by regulation 1408/71 have been applicable in relations between the Member States of the European Union and France.

The principle adopted is that of being subject to the Social Security system of the country of employment.

Thus, in application of 1 ° 0 bis of article 83 of the CGI , the contributions paid by frontier workers under the compulsory retirement and provident schemes to which they must join in the country where they exercise their activity are admitted. as an unlimited deduction for the determination of their taxable income for income tax.

You could argue any pension not the State pension is not compulsory in the UK- so that would put the mockers on other pension deductions – even those appearing on one’s pay slip (pensions supplementaire). However these might be admitted through the argument it’s compulsory to pay into them if one wants the employer benefit. And figures appear on the payslip. (though trying to explain the tax relief at source element, if one has that, might be weird).

Which leaves to argue, personal pension contributions. These seem clearly aligned to the PER (formerly PERP) – and there are limits to contributions in France (10% net salary I think). So if personal pensions are admitted to the deduction, the fisc might argue the deductible amount must be in alignment with France limits, not UK limits (which are of course 100% of gross salary).

These arguments I shall of course be running past the tax office and they might not delve into small print of what is ‘compulsory’ elements of UK pensions, perhaps even just saying ‘ok its deductible in the UK so deduct it here). The ideal!

One final argument is that when taking the pension lump sum, at the flat rate, it has to be tax deductible to qualify, so it wouldn’t be coherent to consider they aren’t deductible in France for the purposes of the effective tax rate, but be admitted as deductible for the France lump sum flat tax!

I’d be the first to admit I might be pushing on string here!

But as said if anyone has already made any of these arguments and had them accepted (or not!), or just done these deductions I would love to be armed in advance, and doubtless loads of others might be grateful. Or even just a critique of my reasoning?

I’ve also included a link to PER’s for what its worth.

PERP

https://bofip.impots.gouv.fr/bofip/1098-PGP.html/identifiant=BOI-IR-BASE-20-50-20150618