British pensions in France

Taxation of British pensions

Do you want to leave the continent and live happily in France for your retirement?

Here are some explanations to understand taxation of British pensions in France

Taxation of British pensions in France: determination of the place

Article 18 of the bilateral agreement of June 19, 2008 provides that “Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in respect of past employment shall be taxable only in that State.

In other words: A French resident receiving UK-source retirement pensions would be taxable in France.However, the following article (article 19 of the bilateral agreement of June 19, 2008) specifies that pensions from the civil service, paid by the State or local authorities, remain taxable in the country where the income is received.

Thus, for example, military pensions paid by the UK remain taxable in the UK only. For each British pension received, it is therefore necessary to determine whether it is a “private” pension, taxable in France, or a government pension, taxable in the United Kingdom. The reading of tax treaties can be complex because the precise analysis of a tax situation can involve several articles.

Process of taxation

Pensions are subject in France to income tax on a progressive scale (attached), after deduction of a 10% allowance for expenses capped at €3,912 (2021 income) for all members of the tax household.

Taxable income fraction per unit (2021 income) Tax rates

Not exceeding 10 225 € : 0%

Higher than 10 225 € and lower or equal to 26 070 € : 11%

Higher than 26 070 € et lower or equal to 74 545 € : 30%

Higher 74 545 € et lower or equal 160 336 € : 41%

Example: Mr. and Mrs. Smith, both 66 years old, have been living in France since 2020 and receive a private pension from an English source of €50,000 (private pension taxable in France under the tax treaty).  This is their only income.  Their tax household has two units.

Gross income = € 50,000

Abatement of 10% limited to 3912 €.

Net taxable income = 50,000-3,912=46,088 euros

Application of the tax scale per tax unit, i.e. 46,088/2 = 23,044 euros

So 10.225*0% + (23.044-10.225) *11% = 1410,09 euros

So in total for 2 parts = 1410*2= 2820 euros of taxes.