BREXIT – TAX IMPLICATIONS ON NATURAL PERSONS
Since January 1, 2021, the United Kingdom has left the European Union. This unprecedented situation led the two parties to reach an agreement on the terms of separation, thus involving a certain number of tax implications for individuals.
• Treatment of British securities in an Equity Savings Plan (PEA)
Securities issued by UK companies are no longer eligible for PEA and PEA-PME, one of the eligibility conditions being that the company issuing the securities is located in an EU Member State or in another state belonging to the European Economic Area (EEA). In the latter case, a tax treaty that includes an administrative assistance clause in order to fight against tax fraud or tax evasion is mandatory between this State and France.
The holding in the PEA or in the PEA-PME of such securities therefore constitutes a breach of the plan's operating rules, in principle resulting in its closure (article 1765 of the French Tax Code).
However, a tolerance period is provided (Ordinance No. 2020-1595 of December 16, 2020 and the implementing decrees of December 17 and 27, 2020). Securities from British issuers subscribed or acquired before December 31, 2020 remain eligible for the PEA for a transitional period of 9 months.
These securities are to be withdrawn from the PEA no later than September 30, 2021:
- By selling them under the PEA;
- Or by transferring them outside the PEA (a compensatory payment in cash must be made on the plan).
• Application of the Exit Tax system for tax residence transfers to the United Kingdom
As the UK has similar legal instruments to assist in recovery and combating tax evasion to those existing between EU member states, the automatic deferment of payment without security continues to apply.
The procedure for transferring the tax residence to the United Kingdom remains unchanged.
UK operators are also exempt from appointing a tax representative.
• Donations to UK non-profit organizations (NPOs)
Donations and payments made for the benefit of non-profit organizations (NPOs) headquartered in the United Kingdom no longer qualify for the tax reduction for donations or the tax reduction on real estate wealth tax.
• Tax regime for real estate capital gains realized by a French tax resident on the sale of real estate in the United Kingdom (including his former principal residence)
All real estate capital gains realized by a French tax resident are subject to income tax and social security contributions, whether the property sold is located in France or in the United Kingdom.
However, under the tax treaty of June 19, 2008, between France and the United Kingdom, if the building is located in the United Kingdom, this taxpayer benefits from a tax credit equal to British tax and chargeable to the corresponding French tax.
In the event that the real estate capital gain from British sources would be exempt, no tax credit would be granted in France under this tax treaty.
If it concerns the transfer of the former principal residence, a tax exemption applies on a double condition:
- The property constitutes the main residence occupied by the transferor until it is put up for sale, and,
- The property remained free of any occupation until the sale and the transfer takes place within a normal timing / period (BOI-RFPI-PVI-10-40-10 n ° 190).
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Tax regime for real estate capital gains realized by a British tax resident on the sale of real estate located in France
With regard to tax on real estate capital gains realized in France, UK residents no longer benefit from the treatment applicable to EU residents on two important aspects:
- They must appoint a tax representative accredited in France (except in the event of an
exemption - sale price less than € 150,000);
- They no longer benefit from the exemption for social security contributions (CSG and
CRDS) and, therefore, the tax rate of 17.2% applies to real estate capital gains realized
as of January 1, 2021.
Thus, UK residents with assets in France who are considering a sale in the near future should be informed of the tax implications.
• Situation of the United Kingdom with regard to social security contributions on income from property
As of January 1, 2021, the United Kingdom is no longer subject to the provisions of European Regulation (EC) No 883/2004 on the coordination of social security systems.
Thus, British residents no longer benefit from the exemption from the general social contribution (CSG) and the contribution for the reimbursement of social debt (CRDS) based on income from assets.
Consequently, income from assets is subject to social security contributions at the overall rate of 17.2%.