There are news reports today that the French are going to impose new taxes on the rental incomes and capital gains declared by UK resident owners of French properties.
Right now UK residents who own and maybe rent such properties get favourable treatment to the French. Whilst these UK resident people are subject to tax on their capital gains and rental income arising in France at present they are not, unlike their French counterparts, at present charged to social insurance charges (the equivalent of national insurance charges in the UK) on that income.
The new move is to charge those UK residents to the same national insurance charges that their French counterparts pay. As this change eliminates a ring fence in favour of non-residents it has to be welcomed by all committed to tax justice.
But there's another much more important aspect to this and that's if the French have the sense to charge national insurance on rents and capiotal gains why the heck aren't we? The avoidance of national insurance is a major activity in the UK, aided and abetted by the numerous loop holes the law provides. It is time we shut them, as it looks like the French are.
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It will be interesting to see what the European Courts have to say about this.
A non-French resident is not entitled to claim benefits / use public services in France, so presumably the French government is going to have to allow non-residents to claim / use them. Otherwise they will almost certainly be in breach of EU non-discrimination rules.
I’m not quite sure what you mean here Richard. If a person has a holiday home in France, which they rent out occasionally, then I agree they should pay tax on that income, in France. The same goes for CGT if they sell it. I have a small holiday place in France, I do not rent it out and all my income is from UK sources which I pay full tax and NIC on. I also pay ‘taxe fonciere’ and ‘taxe d’habitation’ in France which makes UK council tax look rather cheap. I pay TVA on all goods and services I use in France. As the previous poster asked, why should NIC charges be paid when there in no access to benefits or entitlement to a pension upon retirement?
Couldn’t agree more – it has always been somewhat perverse that eanred income has carried a surcharge, although I can just about remember when the Tories abolished the unearned income surcharge.
One wonders also how the UK/France social security agreement (I think it is a common EEA agreement) provisions will apply to this move which must be in breach of that?
Please don’t take me as a supporter of non-resident property owners, but I have to say it rather looks like a cheap attempt to stick costs and pain on foreigners who have no voice or vote or rights to benefits in France, something the French seem to be rather fond of doing rather than tackling their own citizens and for France to ignore its international obligations, again a rather common occurence.
I am not an expert on EEA – so I can’t answer that
I am really arguing we should have NIC on investment income and gains here….
They’d be much better off with full collection of land rent for public benefit:o)
A lot of pensioners have investment income, and a lot are not by any means well off.
Do you want to hit them with NIC as well RM?
No – all my writing on this says they should be exempted – at least to a higher level than most people
The thing is that income should be taxed according to the ability to pay rather than its source – obviously those with lower levels of income, which includes many pensioners, should pay low or no tax; but I’m not sure I see much of an argument for different levels of taxation on overall income just because someone is old. If a very well off pensioner earns £60k a year – why should he pay lower taxes than someone working with a family, on a salary of £60k who I suspect has rather more outgoings? Is it that the former are the backbone of the current Tory Party?
Charging foreigners a “social security charge” whilst not allowing them access to “social security services” is illegal under EU law.
In Spain all non-residents foreign property owners are charged an annual tax which “assumes” that they are renting out the property during their absence – whether they are or not! Equally these non-residents are not allowed access to any of the Spanish health and welfare service unless in an emergency.
All foreigners living in Spain are legally required to register as both permanent residents AND tax residents. Tax is payable on a person’s “world-wide wealth” obliging taxpayers to communicate all “accounts, values, titles, income or real estate they own, or are beneficiaries of, or hold a power of attorney for.” Including all property, gold, cars, boats jewellery etc; thus preventing people converting cash “assets” into alternative “assets” to avoid tax.
Under the new law on Fiscal Fraud Law, approved last week, a Spanish taxpayer not disclosing information on overseas accounts may be fined a minimum of 10,000 euros, with an additional 5,000 euros for each item left out.
A foreign resident is automatically a tax payer in Spain even if he pays his income tax in his country and whilst in the past avoiding/evading paying tax was a national pastime now the Hacienda (Spanish Tax Office) is far better equipped/informed (via computer systems and the country’s identity card structure) than HMRC with access to, and sharing with, all the government’s available information on an individual’s fiscal life.
Spain is set to be one of Europe’s tightest controlled tax areas imposing punitive fines on even minor transgressions. Maybe.
“All foreigners living in Spain are legally required to register as both permanent residents AND tax residents. Tax is payable on a person’s “world-wide wealth” obliging taxpayers to communicate all “accounts, values, titles, income or real estate they own, or are beneficiaries of, or hold a power of attorney for.” Including all property, gold, cars, boats jewellery etc; thus preventing people converting cash “assets” into alternative “assets” to avoid tax. ”
I wonder whether EU states and perhaps more importantly tax havens such as the Channel Islands, Gib and Andorra will co-oerate with request for any details of such assets – a real test of their resolve not to assist with law breaking.
Stephen.
The exchange of information absurdity is a huge joke – unless you are a window cleaner fiddling a couple of grand a year then the Crown Dependencies will gladly snitch on you.
These rascals (Channel Islands, Isle of Man, Gib and Andorra et al) only tip-up information when supplied with 100% factual evidence of fraud supported with undisputable written testimony. If a country, Spain for example, was already in possession of this information it could carry out its own prosecution without reference to the “tax haven”.
The tax haven’s wall of secrecy is built to conceal assets other than cash — they have bank safe deposit boxes as well you know!. It’s a stinking mess to which heroes like Mr Murphy are bringing a breath of fresh air.
PS: Tax havens and “law-breaking” are an agreement in terms.
In the interest of balance,does Spain or the UK for that matter,have an automatic exchange of information? There are plenty of “rascals” in the City,and in Spain no doubt as well.
No
At best it is semi automatic – and not in areas you want I think
Of course it is pretty well known that many expats in Spain place their financial wealth into the Channel Islands and other tax havens – and probably use the UK banks and clearing system to transfer their money there in the first place. Would the Channel Islands be so reluctant to provide the information to the Spanish authorities were the person concerned someone suspected of drug running with no visible means of support within Spain?
Stephen
Which people claim that “it is pretty well known that many expats in Spain place their financial wealth into the Channel Islands and other tax havens — and probably use the UK banks and clearing system to transfer their money there in the first place” ?
And if it “well known” that these “many” people arre criminals you should contact the Spanish authorities immediately — who will be delighted to receive all available evidence in support of these allegations.
Similarly: to avoid withholding evidence in matters involving serious crime any information regarding”drug running” amongst expats (who are mostly old age pensioners) must be reported to the police immediately.
Unless of course this is all the product of a vivid imagination …. which would in turn invite legal action for libel and damages.
Putting aside the clear illegality of such “social charges” under various EU treaties, couldn’t such taxes be avoided by folding a property portfolio into a trust of llc? Maybe registered in Lux? Putting an arms-length between the individual and the transaction.
Seems a sensible enough approach to me.