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Innovation in Wealth Management
Innovation in Wealth Management


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Pelican Consulting, wealth management engineers and consultants, offers some useful insights regarding the assessment of social charges for foreigners in 2013.

For the 2013 income tax year, France has assessed the “social charges” of foreigners who have French rental income at the standard rate of 15.50%.

The fact that the French are levying these social charges on foreigners goes against an EU directive from 1971, which confirms that only residents of a country can be charged these social contributions.

As a result of this incorrect application of social security contributions, the European Commissions has opened a “procédure d’infraction” against France, which concerns, sadly, only some of these charges – more specifically only those destined to actually fund the social security system.

Currently, the total 15.50% charge is made up of the following:

1) Contributions sociales generalises – 8.20%
2) Prélèvements sociaux – 50%
3) Contribution pour la réduction de la dette sociale – 0.50%
4) Contributions supplémentaires – 0.30%
5) Prélèvement de solidarité – 2.00%

This makes a total of 15.50%.

As a result of the EU legal procedure, the following charges would be removed on the assessment of foreigners:

1) Contributions sociales généralisées – 8.20%
2) Contribution pour la réduction de la dette sociale – 0.50%

This makes a total of 8.70%.

Therefore the effect would be that the actual charges levied would be the following, since these charges are not related to the specific funding of the social security system:

1) Prélèvements sociaux – 4.50%
2) Contributions supplémentaires – 0.30%
3) Prélèvement de solidarité – 2.00%

This makes a total of 6.80%.

However, all five of these charges are levied pursuant to French Social Security Law, the Code de la Sécurité Sociale, which raises the big question:  how can the EU Commission segregate these charges into those that affect social security in the strict sense and those that don’t, given they all emanate from the same Code de la Sécurité Sociale and all contribute in one way or another to France’s social costs?

No doubt because the EU is being influenced into believing, as the French have claimed for years and years, that all of these charges are not in fact “social charges”, but taxes.

Pelican Consulting
04 90 38 66 01
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A country of sunshine, splendid food, delicious wines, a fabulous lifestyle - and a legal and fiscal system that can, on occasion, baffle even the most proficient Holmsian mind, not least when it comes to acquiring property. 

Whilst the buying process itself is similar to that in the UK - first an exchange contract to confirm intent, then a completion contract to confirm the purchase - the responsibility for drawing up the purchase contract is usually given over to a notaire, a French civil servant appointed by the State. The notary is also legally required to be present at the contract signing stage and is then responsible for filing conveyance paperwork with the relevant authorities.

Go back a few steps however, and arguably the most important (yet too often overlooked) aspect of the purchase process is the manner in which property is to be owned, with appropriate measures needing to be put in place at the time of purchase. Why? Because of the legal, tax and inheritance implications moving forward.

Fortunately for couples with children, legal measures have evolved to counter what, at one time, was the paramount right of children to inherit on the death of each parent, with measures now in place that enable spouses to protect and provide for their surviving husband or wife. Though some of these measures also apply to civil partners, the majority are still worthwhile considerations for those without children, as they can reduce tax liabilities and make life easier for the eventual beneficiaries.

Sample measures which can be put in place at the time of a property purchase include:

• The choice of marriage regime - this is a legal contract that applies to every French-resident married couple essentially outlining whether spouses own assets jointly, or as individuals in their own names. Whilst versions of this contract can be applied to the collective assets of certain married couples, they can also be applied specifically to French property being acquired by non-residents.

• Property acquisition through a French civil limited company. This means of ownership can be advantageous for couples with children from previous relationships, with the additional attraction for non-French resident property owners being that eventual beneficiaries will be seen to directly inherit shares, not property. Under inheritance and taxation laws, shares are dealt with only in the deceased’s country of residence, whereas inheriting property generally always has consequences under the jurisdictions of both the country in which the property is situated and that of the deceased’s country of residence. Furthermore, it is possible to separate the right of ‘use’ element of these shares from that of their strict ‘ownership’: a strategy which can further significantly reduce inheritance tax liabilities.

Whatever your property ownership intentions are, take time to review your options. That way you stand to transform a good move into a truly secure one.

For further information, go to our website or call : 

Call: +33 (0) 4 90 38 66 01

#investmentadvicefrance   #franceexpats  
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