French CSG on UK investment income post Brexit

I have just had the advice of an Avocat de Fiscalité that the effect of Brexit on income from British property and investments will be additionally taxed in France as a direct result of Brexit. It’s pretty complicated but tax in the UK on property is 20% and dividends I think currently 12.5%. The change means that the total additional take by the French will be 30% less a credit for the tax taken by the British. The change is mostly social charges (CSG). It will make a substantial difference to my disposable income.

Indeed it was inevitable that leaving the EU/EC meant losing certain fiscal advantages that are “members only”.
However I thought there was some debate over whether individuals protected by the Withdrawal Agreement could continue to receive the same favourable treatment in some cases. Has it been decided that they can not, then?

I don’t think it’s yet completely transparent whether people will or won’t be charged CSG/CRDS. The exemption to pay these was for people in receipt of a UK state pension or other circumstance that meant that they have an S1. So were not contributing to French Health system.

Everything i’ve heard so far is that this will continue for people protected by the withdrawal agreement at least. However until the tax forms are issued for this year (2022 on 2021 revenue) no-one can say for sure.

Some texts (for capital gains on property) now specifically exclude British citizens, without making it clear whether this applies to all of them or just those out-with the withdrawal agreement.

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I had an idea that some regulations specifically say An S1 issued by another EU state., is that so? I think I must have read that somewhere but I have no idea where.

S1’s are a European wide thing. So S1s from countries that have not stupidly left the EU continue to be treated the same.

Jane, I have the written opinion of a qualified Avocat de Fiscalité and have seen the website commentaries of other French tax lawyers. Their advice seems unequivocal. This doesn’t affect pension income from the UK but I am told it will affect income from UK properties and equity portfolios. I have an S1 under the terms of my UK state pension. I think quite a few Brits in France have supplementary income of this sort from the UK. I did a rough calculation that it will cost me about 350 euros a month. I am married to a French citizen who has a job and pays CSG as well. If it comes to pass I am going to have to make quite a few cuts, difficult at a time of rampant inflation which will be made worse by the emerging war. Another nice one that has emerged is that any Brits resident in the UK with second homes in France who wish to sell are now obliged to appoint an Avocat de Fiscalité if they sell their second homes, and the fees will be between 1 and 3% plus TVA of course. Brexit the gift that keeps giving.

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The Avocat quite specifically informed me that since Brexit CSG will be applied to income from UK investments regardless of the S1 granted to British pensioners. this is because the UK is no longer in the EU and this aspect was not agreed in the Withdrawal agreement, so thank Boris and his mob of charlatans.

I am arguing the later point at the moment (we are selling a second property) and have asked to see the legislation or regulations that state that. Currently article 244 of the code impôts clearly states that residents do not have to use a fiscal representative. (The fee is usually 0.5%)

This is all yet another thing that was not sorted out in the 4 years between the referendum and Brexit, and in the 2 years since. So I imagine that there will be another “De Ruyter” case at some point in the future.

It may well be that if people leave to go back to the UK before their French property is sold will be brought into this. They will not get any residual monies from the Notaire until the Avocat de Fiscalité has provided their report and all taxes, including any tax on increase in value, have been paid. There was a time when many French properties did not rise in value much but prices have gone up recently. Your main home could become your second home if you went back to the UK and bought a home before your old French home was sold. It’s a minefield.

Apparently more complications are coming in about wills as well, and writing an English will if you are English may no longer apply to property in France. I currently have a very small second home in France which I think I will now sell just because of this. I have had it for 50 years so no tax on the plus value.

My understanding is that residents do not have to use an avocat as well. Non residents now have to, by all accord.

I was told that the WA was silent on this aspect. Thanks Boris.

If I live here I have always assumed that any income I would have from anywhere would be taxed. As far as I know (and @JaneJones really is the expert here) having an S1 exempts from some of the social charges but not all.

And why should income earned outside France not also be taxed? Income is income after all.

Obvs this means one might be more interested in ensuring dividends UK-based investments might earn were not taken but re-invested. But in some (hopefully many) later years, tax authorities might come along to say the way you first thought of, of doing this might require taxation as income before re-investment. So differently structured investments may have to be chosen by some.

The questions outstanding and where an individual having S1+WA status might make a difference, or not, on the taxation of overseas property or investments, seem to concern capital taxes: currently capital gains in particular, when residential property is disposed of. As it seems there is no question that income taxes apply.

As Jane says those who might be affected will have to wait and see. But it sounds as though even if decisions are made by tax authorities whether favourable or unfavourable, there will still be potential confusion for the next 2 or 3 tax years at individual tax offices. Just as a few Préfectures went off piste regarding WA CdS procedures, and some Caisses Maladie like mine operated extra requirements the French Government had stated were.specifically not required, for applications from WA beneficiaries.

I heartily agree with your mépris of the British government apparently having completely neglected to sort out this kind of stuff before Brexit.

Indeed as I understand it we are not talking about income tax here, because that is dictated by the France UK tax convention and Brexit has not changed this. It is purely a matter of social charges. In this respect member states enjoy more favorable treatment than third countries, and this is why Brits may find themselves subject to different rules after Brexit.
If I have misunderstood I would be obliged to @JaneJones for clarifying since as you say she seems to understand these things better than many accountant (or perhaps you are an accountant Jane).
But I do not think income tax per se is affected?

Apparently as the UK was previously a member of the EU its citizens living in other EU countries enjoyed certain privileges relating to social charges which are different to income tax. Since we left the EU we lost the privilege. The actual income tax situation remains as before. The end result is a loss of income which wasn’t there before Brexit if, like me, you rely more on investment income than pensions. This year’s tax declarations on the 21 income will be the first that will be relevant and I understand that it is payable in arrears. That means I will have a tax bill in September of about 4000 which currently I have nothing to pay it with! The investments in the UK which give me income are not mine to sell!

French nationality for you, David!
I do very much sympathise and I hope that things turn out nowhere near as bad as you fear.

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That’s pretty much the situation post Brexit. It’s the social charges on UK investment income that will now be attracting CSG, but I understand that overall the total tax and charges take should not be more than about 30%. The calculations look pretty complex and I shall be getting an accountant to advise me, whereas in the past I have done my own declarations. I take care to do annual spreadsheets of income and expenditure and with inflation and tis latest CSG issue I shall have to do some significant rearrangement. I was getting 1.43 euros to the £ at one stage and now it’s struggling to be 1:20 and inflation is coming sure as eggs is eggs.

Another thing that I am sure @JaneJones will either confirm or debunk, but am I right in thinking that social charges start in theory from the first euro meaning that even if your income is below the tax threshold you are still potentially liable for social charges?

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Yes, I believe that to be the case.

I am no expert in any way, just slightly nerd like in tracking down information and comparing stuff to try to reach what might actually be the case.

The withdrawal agreement only dealt with social security coordination - of which the S1 is one example. And it seems fairly clear that the exemption on social charges on pensions will continue because they are in the same basket of social security/benefits/etc. Fingers crossed anyway!

But of course the WA completely silent on how this then is considered in terms of other income that is taxable, and attracts social charges. The United Kingdom has been firmly removed from, for example, the calculation of taxes on property capital gains:

“Les prélèvements sociaux sont dus au taux global de 17,2 %.
Exception : les personnes qui ne sont pas affiliées au régime obligatoire français de sécurité sociale mais qui relèvent d’un régime de sécurité sociale d’un autre état membre de l’Union européenne, de l’EEE ou de la Suisse sont exonérées de CSG et de CRDS. En revanche, ces personnes restent redevables du prélèvement de solidarité de 7,5 % prévu à l’article 235 ter du CGI.
Le Royaume-Uni ne fait plus partie de l’Union européenne ni de l’EEE depuis le 1er janvier 2021.”

But it is silent as whether that means all UK citizens, or that there can be an exclusion those with WA protection…

So other investment income is quite possibly the same. We need to see what the tax forma say when they are released in March/April.

The avocat told me that CSG would be applied to total UK investment income, before deduction of UK income tax. The UK state pension and private pensions would not be included for CSG, he said. The income would be after payment of management charges etc but before application of UK income tax. He also told me that the total paid for taxes and CSG should not apply to more than 30% together which is what is charged on dividends etc in France. We shall see. If not the tax and CSG take even on quite small income could be approaching 40%. That is radical. Don’t even have the vote anywhere any more either.