High tax rates are a big threat to expat investors living in France – even on tax-free holdings in other countries.
Not only are investments held in France attract huge amounts of tax, but British expats with tax-free holdings in Britain, such as ISAs and premium bonds will find that they are taxed at up to 64.5%.
Besides tax, the other investment threat is inflation which erodes the spending power of cash in the bank.
So expats in France have to weigh up whether to lose money by stashing money in a savings account pay a miserly rate of interest or invest the cash and try to outrun inflation by finding stocks and shares producing a decent yield – only to face the tax man wanting a slice of the pie.
Investment income in France such as bank interest, dividends or profits from selling shares are simply added to an expats other income for the year and taxed at the marginal rate for the total income up to the top rate of 45%.
Don’t forget that anyone earning over 250,000 euros (around £178,000) pays an extra 3% income tax and a wealthy expat with an income of 500,000 or more euros has to pay 4%.
Then come ‘social charges’ that pile another 15.5% on earnings from investments.
Adding income tax, CGT and social charges means the highest earners are taxed at 64.5%, which is why around two-thirds of French expats are not keen to return home, according to a survey by jobs firm Humanis.
Some relief is available, depending on the time an investor has held shares – 50% CGT relief on investments held between two and eight years and 65% for longer periods.
Another unpopular tax with expats in France is a wealth tax levied on each household’s global net worth on January 1 each year.
Succession law change
The tax is paid by everyone with a worth of more than £960,000 – the tax starts at 0.5% and rises in bands to 1.5%.
One tax relief British expats will cheer is on the way.
From August 2015, they can elect to duck out of French succession rules in favour of those in force in Britain.
Succession is a complicated and expensive topic in France – so if you want to opt out and come under British law, it’s a good idea to take some professional advice.