Hi everyone,
We would be grateful if somebody could advise…
My husband and I are early retirees,we have been living here in France for 16 months and our income comes from letting some small,furnished properties in the UK. We pay UK tax on this income and claim various expenses incurred by the properties against that tax (as calculated by our accountant in the UK).
We have a furnished property here in SW France that we want to let out through Homeaway.co.uk. Our question is this - if the rent is paid in sterling to our UK bank account,rather than in euros to our French account,can we pay tax on that income in UK rather than France,claiming expenses (furniture,decoration,cleaning etc) against that tax? Or do we have to pay tax on the rental income in France,because the property is in France?
You are required to declare your worldwide income in the country in which you are resident for tax purpose. How and where that income is received is not relevant. As you have been living (presumably full-time and permanently) in France for the last 16 months then you need to declare this income and pay your tax (if any) in France. You will also need to declare your UK income in France.
You will also, possibly, have to pay social charges (the French equivalent of National Insurance) on this income. I’m no expert on this but there are other people on this site who are and will hopefully respond.
You could also go to your local tax office and discuss it with them. They are usually very helpful and friendly.
Thank you Mandy ,yes we will declare our worldwide income (sounds more than it is!) and as we pay tax in the UK we would hope not to pay in France as we understand there is a double tax treaty between the two.Just wanted to confirm that the French house income could also be taxed in the UK.My husband thinks it can,but I can’t seem to find confirmation of this.
We have a property we let in the uk although we are french residents for tax. We were advised that you pay the tax of the country where the property is located. We had to file Uk self assessment forms but there is no requirement to pay tax here for us. The uk doesn’t levy social charges on rental income but here it comes off all income you receive. From our experience there isn’t a box on the French tax form for rental income from abroad and our source at the impot office confirmed this. I did read on another forum that income from holiday letting is not as attractive here in France due to the additional tax/social charge burden. I think it depends on the profit margin.
No you will not pay tax in the UK on French income unless you are resident in the UK for tax purposes. You can’t chose where you are taxed, it is determined by law.
You are right about the double tax treaty. You will still need to declare the UK income on your French tax return and if there is any French tax to pay you will be able to deduct the tax you have paid in the UK. Here is a copy if you need help sleeping!!!
I’m not sure you have received the correct advice. I attach an article by Blevins Franks that explains it well. You should be declaring your UK rental income on your French tax return and there is a box for it which is explained in the article.
I think you may need to revisit this with your local tax office.
If you want to do some more research yourself then you might want to try using the words I used in Google which was “taxation of UK rental income in France”. You will get lots of results.
All your worldwide income has to be declared in France if you’re tax resident here, regardless of whether it is taxable in France or not, because it all has to be included in your RFR. If you don’t declare all your income, your RFR will be lower than it should be, and the RFR is a potentially an important figure because it’s used for all kinds of purposes (eg calculating your taxe d’habitation). If your RFR for the year is wrong due to you not having declared all your income and it has to be corrected retrospectively, that could lead to quite a lot of complicated disentangling even though it wouldn’t change the amount of tax due.
French and UK tax authorities do share information.
If a French Resident has not been declaring ALL their worldwide income… to the French authorities… do not despair.
Get your facts and figures together… then make an appointment to go through everything with the folk at your local tax office. They are not ogres. They understand that foreigners get things wrong from time to time.
The most important thing… is to do it now… do not wait to be found out.
Mandy,Anna and Stella,
Thank you so much for your info and support.I felt a bit nervous asking this question as I thought we should have had it all sorted. We will now make an appnt with the tax office and take our UK tax info and will hopefully get the form filled in correctly. Thank goodness they are not Ogres,Stella!
I’m so pleased you have seen this post Anna. I knew you would be able to confirm this one way or the other. I know what happens from a UK point of view (it was my job in a previous life!!!) but never really sure from the French point of view.
If you pay tax in the U.K. on U.K. rental income, under the DTA between France/UK, does that mean you will have no liability in France on that income? I ask, because under the U.K./Italy DTA, you do on any difference between U.K. and Italian tax rates. For example, if your income from a U.K. rental £10k, and you are able to set that off against your £11.5k personal allowance, paying no tax therefore, then you will be liable for tax at 23% in Italy, where they have no personal allowances. If you were liable on the income at 20% in the U.K., then you would be liable for an additional 3% in Italy. Plus local income tax as well on top. Is this not the case in France, where you would make up the difference between U.K. liability and French liability?
and there is also Social Charge levied in France on income from rentals etc…
As said… French allow for what has been taken in Tax in UK… and will only charge you if their figures would have demanded more Tax… sadly, if you have paid more Tax in UK than the French Tax system would have demanded… France will NOT pay you back the difference.
But I believe with U.K. rental income you can elect to have it taxed in the country you are tax resident instead. Quite frankly, if you are going to end up paying French tax rates on it anyway incl social charges, you might as well. At least they won’t impose a wealth tax on the property value each year, another Italian ‘treat’.
This is not correct Dominic. The Tax Treaty between France and the UK stipulates that income from property is taxable in the country in which the property is situated.
The UK generally requires (with a few exceptions of course) that income and capital gains that arise in the UK are taxed in the UK.
If there is a Tax Treaty between the UK and the country of tax residence then that will usually provide that any tax paid in the UK is relieved in the country of residence. However, if the UK tax is more than the tax due in the country of residence then no repayment is usually given.
Mandy is absolutely right - as a general rule of taxation law, the country where the income was generated, or the product / service realised - has first dibs on any tax liability. Nothing to do with residence.
Unfortunately dual tax treaties do tend to always give you the short straw. If you live in country B but you have to pay tax in country A, then if the tax you pay in A is at a higher rate than you would have paid in B, you don’t get any back. If the tax you pay in A is lower than you would have paid in B, you may have to pay extra.
But looking at it glass half full, it’s better than being taxed in full twice, and there’s not usually a huge difference between what you’d pay in France and what you’d pay in the UK.
