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This column is by Bill Blevins of Blevins Franks financial advice group (www.blevinsfranks.com) who has written for the Sunday Times on overseas finance for 10 years. He is co-author of the

Blevins Franks Guide to Living in France. MANY expatriates in France rely to a certain extent on savings built up before moving here to provide income, or at least to have as backup if

needed. So it is important to understand how various overseas savings and investments are taxed here so you can factor in the cost. It is also the starting point in helping you structure

your investments so you pay as little tax as possible in France. Remember, if you are or become resident in France you are liable to tax on your worldwide income and gains, including any

made in offshore centres. There are two types of tax on savings income in France: (1) income tax at scale rates or a fixed rate on certain income, and (2) social charges of 15.5%. Income and

gains are liable to both these taxes. The income tax scale rates for 2011 income (payable in 2012) are: Up to €5,963 – 0% €5,964 to €11,896 – 5.5% €11,897 to €26,420 – 14% €26,421 to

€70,830 – 30% Over €70,830 – 41% For 2011 and 2012 you will pay an extra 3% if you have income between €250,000 and €500,000 and 4% for income over €500,000. How is bank interest taxed? You

can choose whether your bank interest is taxed at the scale rates of income tax or a fixed rate of 24%. In both cases it is also liable to social charges which are now 15.5% (with effect

from January 1, 2012, where paid in arrears and July 1, 2012, if deducted at source). If you opt for the fixed rate of tax on interest earned from a French bank account it will be deducted

at source. For interest earned outside France you would need to elect for the fixed rate option by completing form 2778-SD each time interest is paid. This form must be submitted and the tax

paid within 15 days of the end of the month of receipt. Otherwise the scale rates will apply. When you pay the withholding tax, no element of the social charges is tax deductible. What

about offshore bank accounts? Again, you can choose whether interest is taxed at the scale rates of income tax or the 24% fixed rate. Again, you pay social charges. Under the EU Savings Tax

Directive, most of the participating jurisdictions apply automatic exchange of information. A few third parties still provide the option to have a withholding (retention) tax deducted

instead and the rate is now 35%. The Isle of Man and Guernsey no longer offer the withholding tax option. Since offshore interest is taxable in France, you should declare the income here

each year, even if you pay the withholding tax. Failure to do so will be considered tax evasion. Although not done at present, the French government can tax offshore assets at a higher rate

than EU ones, so there is always the risk that tax on offshore income will be increased. What about UK investments? While ISAs, PEPs and Premium Bonds are tax free in the UK, they are not

tax-efficient in France. All income is subject to French tax plus social charges, and gains on share sales – even within PEP or ISA wrappers – are subject to capital gains tax. Interest from

ISAs and PEPS can either be taxed at the scale rates of tax or the 24% flat rate, as with bank interest. Note that you can continue to hold your ISA after you have left the UK but, as a

non-UK resident, you cannot contribute any more to it. Premium bond winnings are generally added to your other income for the year and taxed at the scale rates. With regards to other

investments, gross dividend income from UK shares (the dividend received plus the 10% tax credit treated as being attached to the dividend) is taxable in France – although can be offset

against the French tax due on the income (and against social charges) to avoid double taxation. You can opt for the gross dividend income to be taxed at a flat rate of 24%, in which case the

income has to be declared and tax paid within 15 days of the end of the month of receipt. No part of the social charges is tax-deductible. Alternatively, you can deduct 40% of the net

income from the gross income, plus an abatement of €1,525 per person, and add this to your other income taxed at the scale rates. The tax is calculated on this income and, for UK dividends,

the UK 10% tax credit is then deducted from the French tax due. Any unused tax credit can be offset against the social charge liability on the gross income. The gross income is subject to

social charges, whichever method of taxation you opt for. Selling shares, including those in ISAs and PEPs, are taxable disposals in France. The capital gains tax payable is 19% (since

January 2011). Social charges are payable at 15.5% (from this year), so you will lose 34.5% of your gain to tax. There is no annual exemption against gains on share disposals. Tax efficient

investments While France is a high tax country, there are some very tax-efficient investment vehicles available that can reduce taxable income and thus income tax and social charges. In

some, they can also mitigate French succession tax. They are, in fact, probably more beneficial than ISAs are for UK residents. Note that the tax information in this article has been

summarised and it is very important you seek professional advice for your personal situation from an adviser who keeps up to date with changing French taxation rules and rates. The tax

rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change.