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Thursday 11 February 2010

QROPS France

British expats abroad find tax breaks in France can match or exceed those in the UK, after compulsory social charges are taken into account.

However, as in Spain, French fiscal law offers favourable treatment to people with annuities.

So, instead of paying income and social taxes - which can be as high as 51 per cent in total - pensioners can enjoy much lower effective rates of tax on annuity income, depending on their age.

For example, up to 70 per cent of the annuity income can be taken tax-free by annuitants who are 70 years or older; up to 60 per cent can be tax-free for those over 60 and up to 50 per cent can be tax-free for those who are 50 or older. Even annuitants who are aged less than 50 can take 30 per cent of their annuity income tax-free.

However, the complexity of French fiscal law makes it vital to take expert advice from professionals who are fully authorised in that country. For example, wealth tax remains an important consideration but the capitalised value of annuities may be exempt from French wealth tax, provided the fund was set up in the context of a professional – that is, paid – activity and the savings period lasted for more than 15 years.

Pensioners who wish to pass wealth to beneficiaries after their death should also seek professional advice on French Succession Tax.

There are too many important differences between this and Inheritance Tax to tackle here – but also valuable opportunities, such as the usufruct (called usufruit in French) to make tax-effective lifetime gifts, while retaining the right to remain in occupation or receive income.

HM Revenue and Customs (HMRC) renders such gifts with reservation ineffective for IHT avoidance purposes in Britain but they can continue to work in France, demonstrating the importance of people who retire overseas taking locally authorised advice.
By Ian Dowie
http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/7189353/QROPS-and-pensions-France.html

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