Taxation of Lump Sum Pension Payments

Lump sum retirement pensions are taxable in France, although subject to particular rules.

Historically, the taxation of lump-sum pension income has been a vexed question in France, as such sums are not automatically tax free as is the case in the UK.

Until 2010 there was actually no specific mention of pension payments made in the form of capital, which were merely taxed as an exceptional non-recurring payment, under which the tax due could be spread over a number of years.

Since 1st January 2011 such payments have been subject to specific provision through Article 59 loi n° 2010-1658 du 29 décembre 2010 de finances rectificative 2010 and Article 41 LOI n° 2011-900 du 29 juillet 2011 de finances rectificative 2011.

The result of this recent legislation is that those resident in France who receive a lump-sum retirement pension that is taxable in France now have four options from which to choose, although subject to qualifying conditions in two cases.

i. Marginal Rate - You can choose to make no specific provision and have the lump sum taxed in accordance with tax rates and bands applicable at the time of receipt. This option is only likely to make sense if your marginal rate of taxation is no higher than the lowest rate of 5.5%.

ii. Exceptional Payment - You can request that the lump sum is taxed as an 'exceptional payment' under which you can divide the sum by four equal parts, with each quarter part added to your other income for each of the four years. This is called the système de l'étalement.

iii. Quota Part - Again as an exceptional payment you can request the sum is calculated by adding a quarter of the net taxable lump sum to your other net taxable income and then by multiplying by 4 the tax then due which is paid in a single payment.This is called the système du quotient. (Article 163-0 A Code général des impôts). To qualify as ‘exceptional’ in this case the payment must be greater than the average of total net taxable household income over the previous 3 tax years.

iv. Fixed Rate - You can opt for the whole of lump-sum pension to be taxed at a fixed rate of 7.5%. This fixed rate option is called the prélèvement forfaitaire libératoire. (Article 163 bis Code général des impôts). The option is only available if you receive the whole of the lump sum to which you are entitled, so that no part is deferred for payment at a later date, known as 'flexible drawdown'.

The option to be taxed at a fixed rate superseded regulations...........

You can read the remainer of this article at: Taxation of Lump Sum Pension Payments

when in Rome, Doreen... ! If youchoose to live in a different country you can't cherry pick, you have to accept things the way they are ;-)

MOH has his pension paid into a UK account and it is taxed in the UK but noted on our tax form here in France. My private pension is due to start about two and a half years time. I will be entitled to a lump sum, but again I am proposing that this and the monthly pension payment remain in our English account and be taxed there. Will I still have to pay tax on the lump sum here in France even if it never arrives here?

What is the starting point for taxation of a lump sum? If you have a small amount to come does this still get taxed?