Business panel: French tax residence triggered by differing criteria
We are spending more and more time in our French holiday home. Are we going to be treated as French tax residents?
Virginie Deflassieux, French Tax Director, BDO Guernsey, replies:
UNDER French domestic tax rules (Article 4 of the French tax code) you will be treated as French tax residents if:
a) Your home (foyer fiscal) is in France or, if this cannot be determined precisely, if France is the place where you spend most of your time in any given tax year, or
b) you carry on your main professional activity in France, or
c) your centre of economic interest is in France.
The trouble is that only one of these criteria is sufficient to trigger French tax residence. In theory, if you spend more time in France than anywhere else in a calendar year, you may be treated as a French tax resident for that year. In the absence of any double tax treaty between France and Guernsey, if you find yourselves dual residents (in France and Guernsey) there is a risk of double taxation. Sadly, the Tax Information Exchange Agreement, TIEA, signed between the two territories does not prevent this.
A French tax resident status leads to an exposure to French taxes on a worldwide basis. Although in practice, the French tax authorities largely tend to accept where a person reports their tax residence to be, there is always a risk that this may be checked. In this event, they will look at an array of deciding factors in order to confirm the position and can assess up to three years in arrears.
If you inadvertently become resident in France this may preclude any valuable pre-immigration planning and lead to unexpected French tax exposures. It is therefore important to review your situation regularly in order to understand the full implications and, who knows, you may even discover that the tax implications of a move to France may be totally acceptable.
For more information, contact a member of BDO’s French tax team at:
French.tax@bdo.gg.
