Pension Lump Sum

[Hapi]

Hello everyone!

I am hoping that someone on here will be able to give me a definitive answer to the question: At what point can my tax free Lump sum (taken with my civil service pension), be taxed in France?

I am hoping to sell my UK house in the next few months at which time I will retire (I can't retire before, as I need my salary to pay the mortgage!), and then rent a property while I look for a home in Charente.

I'm sure I read somewhere that you should take your lump sum while still in England or it could be taxed in France.

If I was living in rented property in France when I took my lump sum, and then moved into a home I had bought before I had been in France for 180 days would it be free from French tax?

And if I was still in rented property after 180 days would I be liable to pay French tax on the lump sum?

Or should I rent somewhere in England until I have my lump sum and then move to France?

I would be very grateful if anyone can give me the answer to this!

Hapi

[Bevdeforges]

It's not a definitive answer, but what I understand of the tax system here...

You become subject to French taxes once you are considered "tax resident" in France. Though there are other factors to consider, that begins when you first come to France with the intention to actually live here (i.e. establish residence). Any year in which you are physically present here for at least 183 days in a calendar year you are "presumed" to be resident (which means you'd have to have some pretty darned convincing reason to claim your were not tax resident).

Renting vs. owning property has nothing to do with it. If you come over, stay in a hotel for a month, looking for a more permanent property to move into, I'm willing to bet the tax folks would date your "residence" from your first night in the hotel - or at least would include that month in counting up the 183 days. (Lots of people here live in rented property. It has no effect on their tax status.)

It's probably safest to just take your lump sum while still resident in the UK and subject to UK tax laws. It simply avoids having to have that discussion with the French tax authorities.
Cheers,
Bev

[parsnips]

Hi Hapi,
If, as you say, your's is a civil service pension, paid in respect of services to local or national government in the UK ,then under the double-taxation agreement it ,including any lump sum, remains taxable in the UK under UK rules.(check this with the UK revenue service)
When you become french tax resident, you have to declare all your worldwide income, including your civil service pension,to the french tax authorities--the civil service pension will NOT be taxed in france but is taken into account to calculate the rate at which your french- taxable income(bank interest,dividends,capital gains etc.) is assessed. It would obviously be best not to have the lump sum included in that calculation . So, when do you become french TAX resident?
You can spend up to three months in france as a "tourist"--the form of accomodation, owned or rented, is of no significance. After three months ,if you intend to settle, you are supposed to register as legally resident but as yet no procedure for doing this has been put in place.
You become technically Tax resident when(amongst other criteria )you
spend more than 183 days in a year in france.
In reality you can more or less fix the day you wish to become resident by submitting Form P85 to the UK Revenue stating your official departure date, which can be any date of departure(within reason) during the period of moving and settling-in.
You do not need to make yourself known to the french tax authorities until the spring of the year following the above-mentioned departure date when you are required to obtain and submit a french tax declaration for the previous year's income recieved after that departure/arrival date.
Regardless of when you recieve the lump sum I would not declare it-the french tax man now has a policy of, if he thinks you have omitted
something,writing you a friendly letter inviting you to correct any mistakes you feel you may have made,and, providing you take the hint and put it right (apologising profusely for your foreign ignorance,no doubt),there will be no penalties. The chance of this being picked up are , infact, minimal. .

[giantpanda]

Hi!

Let's start at square one: Will you be French resident, when you get the lump sum?
How is the lump sum taxed ( for a GB citizen)?
What does the lump sum represent?( A pension? A cimpsation? Something that could be classed as life insurance? Or even a private pension ? - for last you would have to be sole contributor, no other contributions).

The question of being a French resident ( at what date it exactly begins ) is not specially clearly ruled by French texts unless you work in France, although the double taxation agreement can be helpful in some cases( not yours ). There are possibilities of adapting, but then you would have have to bring a whole thread of proof.

Yours,


giantpanda

[Hapi]

Thanks for the comments.

My pension is for government service in, what is now, the UK Border Force. I can commute some of my pension and take it as a tax free lump sum.

I think I will play it safe and stay in England until after I've got it!! I don't want to risk having to pay tax on it sometime in the future!!

It is the only time in my life I will get anything tax free so why jeopardise it!!

Thanks again for the help

Hapi