If you have a property in France and you are likely to spend a considerable amount of time there each year, you could find that you comply with the French residency rules and are liable to pay all your taxes in France.

Those who are planning on moving to France also need to know the French residency rules. If you live in France permanently and return to the UK a lot, you could be in danger of also complying with the UK residency rules at the same time and therefore also be regarded by HM Revenue & Customs (HMRC) as a tax resident of the UK.

Where you are tax resident in both France and the UK at the same time, the UK/France double tax treaty (DTT) will resolve the conflict and determine your tax residence status using a series of tie-breaker tests. By knowing the rules of each country and the treaty provisions, you may be able to reduce the amount of tax that you pay and save a significant amount of time in proving your residence status if it is unclear.

UK residents are advised to sell their UK home when they move to France, as the first and most important point of the tie-breaker clause states that you are deemed to be resident in the country where you have a permanent home available to you. If you have a permanent home available to you in both countries you are deemed to be resident in the country which is your ‘centre of vital interests’ ie where your personal and economic relations are the closest. If that is indeterminate, or you do not have a permanent home in either country, you are deemed to be resident in the country in which you have a habitual abode. If you have a habitual abode in both countries, or neither, you are deemed to be resident in the country of which you are a national.

Are you tax resident in France?

If you arrive in France with the intention to reside there indefinitely you become a tax resident the day after your arrival. The French tax year runs from 1 January to 31 December. France takes a ‘split year’ approach and so you will be taxed on your worldwide income only after the date you become liable for French tax as a resident. You need to comply with at least one of the following points to be deemed resident for tax purposes.

1) France is your main residence or home (foyer fiscal). If your spouse and children live in France you will be considered French tax resident even if you work abroad.

2) France is your principal place of abode, your lieu séjour principal. This usually means you spend more than 183 days in France per tax year. The days do not have to be consecutive and the days of arrival and departure are also counted. Even if you spend less than 183 days in France, you may be tax resident there if you have spent more time in France than in any other country.

3) Your principal activity is in France, eg your occupation is in France or your main income arises in France unless you can show that such activity is incidental (à titre accessoire) to your main activity carried out in another country.

4) France is the country of your most substantial assets (centre of vital interests). This means France is the place of your principal investments, or where your assets are administered, or from where a larger part of your income is drawn.

Spouses can have different tax residences when one partner is living in a home in France but the other is living mainly elsewhere. The question of whether a spouse living outside France is treated as a French resident depends on the application of the DTT and on whether a couple are ‘living together’ (ie they have a vie commune).

It is likely that a couple will be regarded as living together if they are married under community property rules, so that the absent spouse will be considered to have his or her ‘household’ in France. If a couple are married under a ‘separate estates’ regime (as most couples from common law countries are), and have not changed it, and they are living under separate roofs, the couple may be taxed separately.

If one of the spouses is treated as a non-resident, husband and wife are liable to French income tax on the worldwide income of the resident spouse and the French source income of the non-resident spouse.

Are you tax resident in the UK?

If you spend more than 183 days in the UK you will be deemed to be tax resident in the UK. The UK tax year runs from 6 April to the following 5 April and when deciding on the date to emigrate it is advisable to leave before 5 April in any year. Like France, the UK also takes a ‘split year’ approach and so you are unlikely to be liable for tax in both countries during the same period.

You can also be deemed to be a tax resident in the UK if you spend on average 90 days or more there per year over a period of four tax years.

The UK residency rules are not set out in statute but based mainly on case law and HMRC practice. It used to be common practice that the days of arrival and departure were excluded when counting days of residence in the UK, but the Government has now changed its practice and from 6 April 2008, a day will be counted if you are present in the UK at midnight.

This new practice will now mean that days of arrival do count but only if you are present in the UK at midnight. If you are passing through the UK, a day spent solely as a passenger in a part of an airport or port that is not accessible to the members of the public, such as the transit area or departure lounge, is not to be counted as a day in which you are ‘present’ in the UK, even if you are there at midnight.

The day counting changes could significantly increase the actual number of full days you spend in the UK and if you are not careful you can be caught out. However, if you have already established tax residency in France under the domestic rules and/or the DTT you could still be regarded as not resident in the UK for tax purposes even if you do spend more than 90 days there, particularly if you have no home available to you in the UK. Care does need to be taken, however.

Establishing residency is a key component as to where you pay your taxes. Whichever country it is, you will be liable for tax there on your worldwide income and gains and, if French resident, on wealth also. There are inheritance tax and laws to consider as well. Once you have established your residency status effective tax planning is essential.