Living abroad is not only a turning point in a career. It also changes the game in investment, tax and retirement. Aspects too often neglected.
In the world of financial advice to expatriates, we made a wry face. The draft supplementary budget for 2011 provided in effect a few steps with a bitter taste for candidates at the start, but for all those who have already left. Although the measures announced are as yet unclear and subject to interpretation among specialists, we know already the outlines with the “exit tax” (exit tax) and tax on second homes.
The “exit tax”, designed to impose business leaders who emigrate before selling their shares could hit all those who hold stakes of at least 1% in the capital of an enterprise and a, 3 million euros, without touching the fund holders. “It is a measure that targets tax exiles, but it is not always clear whether people are leaving for tax reasons or for other reasons, sorry Grenon-Andrieu and Olivier, president of the company Equance. In addition, these provisions go to the wealthy expatriates, while many of them are far from this situation. “With a rate of 31.3% applied to the unrealized gain, including social security contributions, it is a pill that might be hard to swallow,” especially since non-residents are usually not subject to payroll taxes, “is surprised Stephane de Lassus, a tax lawyer (see interview, next page).
“Nothing is settled yet”
Taxation of the residence “secondary” in France – often the downfall of his family to stay in the Hexagon – is equally frowned upon and skeptical scholars. “It will result in an increase in the tax burden for expatriates in countries with a tax treaty with France, but a relief for others,” says Olivier Grenon-Andrieu.
In addition to property tax and residence tax, it will fulfill this new tax, which corresponds to 20% of the assessed value of property. To give you an idea, it is about twice the property tax. At this rate, expatriates will have interest to question whether to retain such property in France if they use little; a temporary rental may ultimately be less expensive.
“Nothing is settled yet, however, warns Narchal Bruno, president of Crystal Finance. We will definitely see improvements appear and disappear several provisions that could be only trial balloons. “It was in July that the dice should really be thrown, with the passage of the law in Parliament.
Despite these provisions, the expatriate status will remain “extremely favorable” judge Bruno Narchal, particularly in countries that have signed a tax treaty with France. Between life insurance avoid paying taxes and inheritance taxes, capital gains from investments who fall through the cracks and tax payroll taxes that are owed more, many savings options resume colors.
You just know how to use at the right time and wisely. Because some decisions must be made prior to departure, others during expatriation, and others, finally, at the time of return to France.
4 steps to follow
1 – Before leaving, fence your accounts and books, but not the ELP
Ready to go? Before leaving the country, we must think about closing the books on Sustainable Development (LDD, formerly Codevi) and A Family booklets, booklets Young children, the share savings plan (PEA) of parents and When this happens, the popular savings accounts (SARA), reserved for taxable little homes. Indeed, all regulated investments (and tax-exempt) are strictly reserved for residents in France and can not follow the investor abroad. In contrast, the expatriate can keep in the Hexagon a bank account – this is very highly recommended – and his savings plan (PEL).
“We must also fulfill some formalities tax, recalls Bruno Narchal, and communicate to his local tax office in France’s new foreign address”, including to receive their tax notices.
Another detail often overlooked by expatriates: consider declaring the following year, the income received while you were still in France. To do this, use the classical form 2042 for income received in France, and the 2042 NR (for Non-Resident) for income received in France after the start. However, we must return to the tax non-residents.
For direct real estate, better not decide today whether to sell for tax reasons: it is better to wait for the vote on the supplementary budget to know exactly where they stand. The worst is never certain …
2 – During the relocation to Shanghai, bidding on contracts of life insurance
Once you’re an expatriate life insurance reserves tremendous benefits. Many people do not know but, when taken out a contract during his expatriation and before age 70, it will be totally exempt from inheritance tax, even for amounts paid after the return before 70 years! So do not forget to open one, at least to take time, because this benefit is in the crosshairs of MPs …
Gains may be removed are generally taxed at 15% for non-residents, but one can choose the scale French it is more advantageous, especially beyond eight years. The insured escape in all cases to social security statements, on the condition that each year from the insurer the quality of non-resident. Luxembourg insurers, with their contracts that allow multi-currency to invest in the chosen country or in major international currencies in this area have a significant advantage: the absence of withholding taxes. It will still report gains in the administration.
Real estate investing should also be considered because it is a priori immune to the current reform. With income taxed at 20% on average, it remains attractive.
However, beware of montages with SCI inputs and consequent current account: “The reform of the ISF is planning to integrate into the tax base the value of these contributions in the current account,” warns Bruno Narchal.
3 – Before coming back, win your potential stock market gains
Just before leaving your country of expatriation to join France, there are several benefits that expatriates can enjoy. For starters, the securities held in the Hexagon (other than those specified by the “exit tax”) can be sold without the capital gain is taxable. So do not necessarily liquidating them before leaving France, but not forgetting to purge his winnings before returning. Otherwise, they must pocket his potential stock market gains as long as you reside abroad. An escape also to social security contributions.
Warning: it is better, anyway, check with a specialist tax treaties that govern your situation because they may provide more or less favorable impacts across countries.
Upon return, there is no requirement to close their bank accounts, life insurance and securities underwritten abroad. Provided, however, to declare their existence to the French administration.
Those who are likely to get the status impartial can enter another opportunity: an expatriation bonus or 30% of compensation that will escape the tax for five years. Excluding fringe benefits, such as tax exemption on 50% of the securities income earned abroad. To qualify, you must have been non-resident at least five years on the national territory and come at the request of a company based in France.
4 – Anticipate questions pension and welfare
If heritage issues are important to address before leaving or returning, those related to social protection are certainly even more. In terms of retirement, for example, the hole created by a French expatriate in diets may be detrimental and contribute to justify a voluntary insurance for expatriates. Membership in the Fund for French overseas (CFE) and IRCAFEX (complementary) can be useful … but expensive.
In fact, work in some countries (Europe, USA, Morocco …) are eligible for quarters in France thanks to bilateral agreements with the French Social Security. Better, then, before making a decision, request a quote from the CFE to determine whether to save or contribute his part.
Health wise, we must also prepare a cover for height, which is not given. “Many middle-income retirees French who went back to settle in Morocco, because they do not have the financial capacity to take appropriate complementary health. And not to insure, it is suicidal, “slice and Olivier Grenon-Andrieu.
The continuation of the scheme of social security with the CFE (including three months in France) costs 200 euros to more than 500 euros per quarter. For comprehensive coverage (basic and supplementary) but capped and no extras, have at least 2,000 euros per year per person under 70 years …
At Meyer International we believe investors should always consider one of the most important maxims of investment – diversification.
