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Brexit - Relocation Paris – Tax and costs

Please note that the information herein is of a general nature and you should not act or refrain from acting on it without professional advice on the specific facts of your case. No liability is accepted by the author or Sykes Anderson Perry Limited in respect of this article. Taxation and property law are complex subjects and the above is a basic outline only and is intended only as a general guide. Nothing herein constitutes financial advice.

Major banks and other institutions have announced that they will now relocate staff from London to within the post Brexit EU area regardless of the Brexit negotiations. Some will be going to France. This will be a costly exercise for the employers as they will end up having to pay generous relocation costs.

Relocation costs

Basic relocation costs are likely to include:-

• Estate agent and legal fees for selling UK home.
• Removal costs.
• Transaction costs buying property in France.
• Interim rental/hotel accommodation.
• Social insertion and support costs.
• Additional family costs.

Estimates on the internet are costs starting at £50,000 but this is a big underestimate. A starting cost of £150,000 per employee is likely to be nearer the mark. There will also have to be substantial salary increases to make this work.

Taxation “Benefit in kind” Relocation costs

Employees need to be aware to what extent these payments by their employers constitute a benefit in kind upon which they could be taxed in the UK or in France. A successful relocation followed later by a large bill from HMRC or France’s Tax Office will lead to a fraught relationship if the employer will not pay it.

In the UK relocation costs for moving to France paid by an employer are taxed as a benefit in kind on the part exceeding £8,000. In France the amount that can be claimed is either the amount actually paid or a forfeit of 10% of the salary at the employee’s choice. There is no cap. If the removal costs are less than 10% of the employee’s salary the employee should claim the 10% costs of salary. High earning employees may be better simply claiming the forfeit 10% relief.

The relocation costs are however more strictly defined but this should not cause a major problem. If the employee pays it he deducts it from his salary but must not be reimbursed by her employer. If the employer pays it, it is added to his salary and then deducted. In most cases the employee will be better off if the relocation costs are paid by the French employer as part of the package for relocating to France.

Taxation of income in France

The main income tax relief provision is Article 155B French Tax Code which is aimed at encouraging Brexit people to relocate to France. This exempts from French income tax the “prime d’impatriation” and any non-French income from French income tax until 31st December of the 8th year following the start of work in France. The prime d’impatriation is the additional payment to work in France over what is normally paid. Broadly the tax exemption cannot exceed 30% of total salary.

The employee must come to France to work for a French company, become French resident and not have been a French resident in the previous 5 years. Importantly the employee can move to work for another company in France without losing the tax relief. This works against the employer who has paid the relocation costs and then risks having an employee poached.

Prime d’impatriation also includes a reduction of 50% on French Capital Gains Tax on the sale of non-French shares and securities.

March 2017
David Anderson