Focus on Wealth Planning #10: International Mobility of people and assets

As the economy becomes more global, so people and capital become more mobile. Managing that capital calls for an international approach, but this is a complex and ever-shifting landscape.
You must have clearly defined goals and reasons for transferring your home or assets overseas, or for moving your investments to France if you are a non-resident. Such decisions cannot be based on tax considerations alone.

Transferring part of your wealth outside France

You may decide to move some of your assets abroad in the interest of geographic diversification:
- by building a real estate or financial portfolio overseas, for example;
- or to guard  against potential national economic or political upheaval.
Doing so gives you the opportunity to tap into diverse financial and wealth management expertise on offer in some financial markets. Accessing high-performance products with attractive features often motivate people to move all or part of their wealth abroad.
Remember that French tax residents must disclose in their annual tax returns if they hold any foreign bank accounts. The same applies to life insurance policies taken out, modified or redeemed with an insurance company outside France. Failure to do so may result in a fine.
And French tax residents holding property worth over €1.3 million are required to declare all of their real estate assets located in and outside France.

Relocating and changing fiscal residence: key steps 

Moving your tax residence outside France is a complex process, so you need a solid understanding of the legal, tax and administrative implications.
Your tax residence is the country where you are considered resident by the tax authorities. In France, you a resident for tax purposes if you meet one of these criteria:
- your household is in France
- you work predominantly in France; or
- the centre of your economic interests, sources of income, investments and assets is in France.
Only one criterion needs to be met to be considered a French tax resident, even if you live partially abroad.
Each country has its own definition and rules around tax residence. That’s why there are international agreements to resolve conflicts of residency between two countries (principle of single tax residence) by setting criteria that supersede domestic legislation. Therefore, before moving your tax residence you need to work with a local tax advisor to examine your host country’s tax characteristics, such as:
- the level of taxation on earned income and wealth, and whether there is a specific regime for incoming taxpayers, which there is in Italy, Greece, Portugal, Spain and the UK; and
-the existence of a tax treaty between France and the host country. France has signed tax treaties with many countries to avoid double taxation of income tax. You would need to check the terms of the treaty between France and your chosen country.
-finally, are there any minimum stay requirements? Some countries require you to stay a minimum number of days in order to be considered a tax resident.

Other considerations

When leaving France, you are required to inform the tax authorities and file two tax returns the following year: one for your total worldwide income up to the date of departure; and one for your French-source income during your time outside France. In other words, if you leave France you are no longer subject to French tax on your global income, but on certain French-source income only.
Note, however, that tax on unrealised capital gains, i.e. exit tax, may apply at the time of departure for taxpayers with sizeable assets in France. Under certain conditions, this exit tax may be eligible for payment deferral, a reduction or even a refund. Leaving France also ends the deferral of taxation on capital gains provided under Article 150-0 B ter of the French General Tax Code, making such taxation eligible. 
The French social security administration and family allowance fund (CAF) must be informed of your new situation.
Most importantly, you must factor in the potential impact on your matrimonial regime and applicable inheritance laws. If you’re thinking about transferring assets, consider whether you should do so before you leave or after you have settled in your destination.
In short, transferring your tax residence outside France requires careful preparation and a good understanding of the rules in order to avoid administrative and tax complications. It is therefore advisable to seek legal and tax advice.

Our support

The rules and formalities for changing tax residence are complex, and so we advise consulting international taxation experts both in France and your host country.
Our wealth planners at Societe Generale Private Banking are on standby, alongside your usual advisors, to walk you through your decisions about relocating and moving your capital abroad.