When purchasing assets in France, the question of taxation always comes to mind. Special tax agreements exist between many countries to prevent or limit double taxation. The problem of double taxation arises from the fact that most countries tax income or earnings which originate from that country, whereas residents of these countries are also taxed on their foreign income.

Are there any agreements between the UK and France?

France and the Government of the United Kingdom of Great Britain and Northern Ireland signed a convention on June 19, 2008 to avoid double taxation and to prevent tax evasion on income and on capital gains.

How does it apply?

Salary :

In the UK, wages are taxed at source, and the convention provides that the country where the salaried activity is carried out benefits from the exclusive taxation of this income. However, this salaried income must also be declared in France (if France became your country of residence) and a tax credit is applied equal to the amount of French tax that would be due, to eliminate double taxation.

Non-residents will not have to declare their salary to the French tax and will just have to keep declaring their wages in the UK as usual.

Interests :

With regards to interests, the convention provides that interests are taxed exclusively in the country of residence. However, this income is also taxed at source in the United Kingdom, but no tax credit is applied to eliminate double taxation, as the agreement states that this income should be taxed in the country of residence. Britons residing in France must therefore apply to HMRC for a refund of the tax paid at source, after having obtained from the French administration a certificate attesting that they have declared this income in France.

Real estate earnings :

The convention provides that income from real estate is taxable only in the country where the property is located. However, this rental income must also be declared in the UK and a tax credit is applied equal to the amount of French tax that would be due, to eliminate double taxation. 

Hence non-residents must declare the rental income from the French property in both France and the UK.

Pensions :

There are three types of retirement pensions in the United Kingdom: state pension, private pensions, and government-earned pensions such as civil service, military, teacher’s pensions, etc.

Under the terms of the tax convention, the state pension and private occupational pensions are taxable exclusively in the country of residence. They are therefore declared and taxed like pensions received in France.

On the other hand, government-earned pensions are only taxable in the country where the employment was carried out, However, this pension income must also be declared in France (if France became your country of residence) and a tax credit is applied equal to the amount of French tax that would be due, in order to eliminate double taxation.

Non-residents will not have to declare their pension income to the French tax and will just have to keep declaring their peinsion in the UK as usual..

Dividends:

The agreement provides that the taxation of dividends is exclusively reserved for the country of residence. But dividends received in the United Kingdom are taxed at source on a sliding scale (you need to check with a UK tax adviser) They are also taxed in France and the taxpayer receives a tax credit equal to the amount of tax paid in the UK, up to a limit of 17.7% of the gross dividend. 

Taxation in France is now at the flat rate of 30% (12.8% income tax + 17.2% social taxes) and, where this is not tax-efficient for a particular household, the previous system of taxation on the progressive scale can be chosen – this enables a 40% tax-free allowance on the gross dividend for income tax purposes but the social taxes of 17.2% are applied to the gross dividend!

Source : http://www.etudes-fiscales-internationales.com/files/traité_Royaume_uni_France.pdf

This article was written with the help of SAREG, a UK and French tax adviser.