French wealth tax: Will you be affected?

It may surprise some that Deputy Prime Minister Nick Clegg has suggested that a UK wealth tax not dissimilar to France’s may be a good idea.

Whilst this may anger some, the system is already common form for some UK citizens, who are paying wealth tax in France on assets held in the country.

This is because France’s wealth tax not only affects the French people, and those who are resident in France for tax purposes, but those who have significant wealth located in France – wherever in the world they may live.

This third group, who have often escaped the tax in previous years, may see a clampdown in the recent future, as France’s tax authorities seek to ensure the concerned are paying their dues.

The high rates have lead some – like famous French actor Gerard Depardieu – to leave the country and take their assets with them.

Working it out

Those with asset wealth between 800,000 to 1,310,000 euros are taxed at 0.55%. The rates progressively increase to 1.8% for those with taxable wealth exceeding 16,790,000 euros.

The tax covers all personal assets, including property, cash and investments, but excludes business assets and historic items.

French authorities are using a number of variables to decide who to tax – with the first being the location of a person’s principle home. If you have more than one home – one in the UK and one in France for example – then the centre of your economic interests is taken into consideration.

Yet even if both those factors do not apply, a person may be liable if their main income is derived from France.

This means those UK citizens who only spend up to a few months in France and harbour no significant wealth in France, will not be taxed.

On the other hand, British citizens who have become residents of France will be privy to the French tax authority’s rules, and will be charged if assets amount to over 800,000 euros.

And UK residents who have significant assets above the lower threshold may also be liable – even if they don’t spend any time there.

The five year rule

Yet there are ways for a person to enjoy a life in France without having to pay for their assets, as while someone moving to France with no other home automatically becomes resident there, for the first five years of their residence they are exempt from it.

If a person were to only live in France for a few years, they would therefore escape the tax entirely.

However they would be subject to France’s other taxes – including income tax – during their time there.

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