Pension funds and wealth tax

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Pension funds and wealth tax

When and how pension funds may be exempt from the French wealth tax

Q: I've just read your very useful guide 'Wealth Tax in France' but can you tell me about assets held within a pension fund. My understanding is that the value of a UK occupational pension fund is exempt. But I have heard that assets held within a SIPP are subject to the wealth tax. And what about Personal Pensions (PP) and Group Personal Pensions (GPP)? I'd very much appreciate clarification on these points. PS 

A: Currently, new French residents are entitled to a wealth tax “holiday” on their non-French assets and this is available for the first five years after arrival in France. Therefore, any non-French pension fund would be exempt for at least the first five years of residence.  After the ‘holiday’ period you would have to consider the value of your worldwide assets as at January 1 each year. There is no blanket exemption for pension funds but the fund can be exempt provided that the following conditions are fulfilled:-

  • Contributions to the pension fund must have been made in the context of a professional activity (this would normally be the case for UK pensions since tax relief is available based on the relevant earnings);
  • Contributions to the fund must have been made at regular intervals over a minimum period of 15 years;
  • Income must not be drawn from the fund before French retirement age.

If these conditions are fulfilled, the income from the pension should be declared as occupational pension income, and taxed in full (subject to the capped 10% allowance).  Where the above conditions are not fulfilled, the value of the fund will be liable to wealth tax.

The difficulty in considering the conditions above is that UK and French pensions systems are very different. For example, in the UK it is quite common to have several different occupational pensions from different employments and also additional personal pensions that may be tied to employment. In practice, many French accountants do not declare occupational funds but would include personal pension funds such as SIPPs. Others would still apply the exemption above on the basis that the contributions into the personal pension have been made out of employment or self-employment income. 

The approach may depend on the view of the local tax office and you should seek advice from a French accountant to ensure that the funds are reported correctly. 

This question was answered specifically for Connexion by Blevins Franks

Please note: 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.
Tax information has been summarised; an individual is advised to seek personalised advice.

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