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Wednesday, 09 April 2008 |
Pensioners and other expatriates transferring money are disgruntled with mystifying conversion charges and unfavourable exchange rates. So what can you do?
Retired Britons living in France would naturally prefer their UK pension to be paid into their local bank account without bank charge deductions and adverse exchange rates. Unfortunately, having your pension paid into a French or foreign bank account will attract those charges and will be subject to movement in exchange rates.
This is true of all money transfers – salaries, dividends, rental income, mortgage payments or any other type of income – from the UK into most continental European banks where banking is not free to the same extent as in the UK. Britons are so used to ‘free’ banking that it is difficult to accept being charged for what appears to be every possible transaction.
UK State pension payments into a UK bank incur no charges but many UK pensioners in France are complaining about bank charges and the scant information available on how much has been deducted and by which institution.
• Receive it in euros
Your UK State pension can be paid in euros into your French bank account. You simply have to let the UK Department for Work and Pensions know, notifying them of your French bank details: IBAN number, account and code number, bank name and address, name on the account, and frequency of payments, ie, every four or 13 weeks or, if less than £5 per week, every 52 weeks.
However, even if your pension is paid in euros, it is remitted in the euro equivalent of the Sterling amount and is subject to exchange rate fluctuations. At the time of writing Sterling is £0.75 against the euro, the lowest it has been for several years, so you are receiving less pension income. There may also be French bank charges for receiving
the money.
Where private pensions are concerned, it does depend on the provider. Ask if they make payments abroad, if the money can be transferred in euros and what the charges are, if any. If the pension provider makes the transfer in Sterling the conversion to euro is made at the time of receipt by the beneficiary bank, which usually incurs charges for converting into euros.
Under the European Commission’s Regulation 2560/2001 Article 3, there should be no difference in charges for electronic transactions in euros for amounts up to E50,000 between domestic EU bank accounts and those made cross-border from another EU country. It does not apply to transactions in other currencies to or from an EU country outside the euro zone, such as between the UK and France.
Further, Article 4 states that institutions must “make available to customers in a readily comprehensible form, in writing, including, where appropriate, in accordance with national rules, by electronic means, prior information on the charges levied for cross-border payments and for payments effected within the Member State in which its establishment is located”. Thus, institutions which charge for currency exchanges into and out of the euro must inform the customer beforehand of all conversion charges they will apply as well as specify the various exchange charges once they have been applied.
Ideally, you want to receive your pension in the currency you are spending – euros – to avoid losses by accumulated unfavourable exchange rate movements.
So what are the options available to get the most out of your UK pension?
• Accept the costs
You can have the payments made to your French bank account from your UK bank account on a regular monthly basis, and accept the charges and exchange rate fluctuations. Alternatively, you can accrue the money in your UK bank account until either you need it or it reaches a relevant sum, eg, £5,000 or £10,000, and then have it transferred. UK banks usually charge around £25 to make such a payment to overseas banks so the larger the amount the better.
• Use a currency agency
Currency agencies such as HiFX or Moneycorp are increasingly popular. Often they are first used to transfer a lump sum to buy property abroad and then later for occasional or regular payments. Currency agencies usually offer cheaper transfer charges than banks, are commission-free and can secure a better exchange rate. Some agencies absorb charges at the receiving end so there should be no charges from your local bank account.
You can transfer the money at the ‘spot’ rate – the exchange rate at the time of the transaction, or a forward fixed rate for up to two years in advance. With the fixed rate you could gain or lose according to how the exchange rate moves. Also, with the forward fixed rate, you may be asked to make a deposit of perhaps one month’s transfer or 10% in advance. Using a currency exchange agency could save you up to £500 or more a year just on fees, commission and charges made by banks.
• Open an offshore account
You could consider setting up an offshore bank account, one in Sterling and one in euros. When the exchange rate is favourable then you transfer from the Sterling account to the euro account.
• Withdraw from an ATM
To take out smaller amounts as required it may be worth using your UK credit card at a French ‘hole in the wall’. Some cards charge no commission when used abroad and offer a better exchange rate than the tourist rate.
• Transfer to a QROPS
A QROPS (Qualifying Recognised Overseas Pensions Scheme) is a new international pension product that permits UK non-residents to transfer their pensions out of the UK. You can avoid exchange-rate risk by choosing the currency of your pension payment, Sterling, euros or any other currency to suit your circumstances. A QROPS has other benefits: providing you remain a UK non-resident for five consecutive UK tax years, the pension is completely removed from UK rules and taxation. You do not have to buy an annuity, and the funds can be invested in a tax-efficient structure from which you can make withdrawals if needed.
You should seek the advice of an authorised and qualified financial adviser if you are interested in more information
on QROPS.
FINANCE Q & A
Interest-bearing accounts
Are there any publications in France which give a comparison of bank accounts and interest-bearing accounts? The English newspapers usually update their lists of best accounts each week.
Also are we allowed to keep interest-paying accounts with banks in England now that we are living permanently in France? We have seen several letters asking if interest on ISAs should be declared to the French impôts, so we assume it is OK to have these accounts.
We have modest savings and cannot afford to risk them with the stock market; we have always kept our money in the bank or building society.
Are there financial advisers here who would deal with small accounts like ours? We feel unable to approach people like Siddalls or Blevins Franks because they are large businesses.
What would a French financial adviser be listed under in the phone book and are they regulated like the ones at home? Name and address withheld
Both Blevins Franks and Siddalls said they welcome enquiries from smaller accounts and will give a free initial no-obligation chat. As to your other questions:
Bill Blevins replies:
It is possible to have interest-bearing accounts in the UK whether at a bank or via an ISA. However, for residents of France, such accounts are declarable for tax in France. ISA accounts are free of tax in the UK but not in France.
With inflation at its highest levels for many years and the banking industry in crisis (Northern Rock etc) keeping money in a bank is not such a risk-free investment. The erosion of your spending power by reference to inflation is likely to see your standard of living drop in future years so it is essential to invest in a lower-risk fashion to provide a decent level of income while maintaining the spending power of your capital. There are plenty of low-risk investments around that will meet this challenge. You should ensure that your investments are not subject to unnecessary taxation as this will also erode spending power. There are many tax-favoured investment choices in France. You need to speak to an independent adviser who understands your circumstances and who can guide you through the various choices. Check out the small print or seek alternative advice before proceeding. Ensure you are dealing with a fully regulated adviser.
The role of independent financial adviser is almost unheard of in France. Almost all of them are tied to one or more banks or insurance companies so that advice is rarely impartial.
Carrie from Siddalls International replies:
I do not know of any English publications in France which have this sort of information. The internet is probably the best way to get hold of up-to-date information in English. Otherwise there are French publications such as ‘Actifs’, or ‘Challenge’ which recently explained different savings accounts in France (in French).
The majority of our clients do not invest in the stock market so our consultants can advise on investments which have lower risk ‘safe funds’ with a guaranteed growth rate.
Financial advisors in France would be registered as something like ‘conseiller fiscal’, ‘conseiller financier’ or ‘conseiller en gestion du patrimoine’. The Orias number is usually a good indication of whether a company is regulated or not. It is important to make sure that an advisor in France not only understands the legal and fiscal system in France but also that of the UK or your home country, otherwise future complications may arise.
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Wednesday, 09 April 2008 |
By Virginie Deflassieux
PKF (Guernsey) Limited
The tax season is now open and all French tax residents are required to hand over their income tax returns to the French tax authorities by May 31, 2008. Fifteen days later, those who have net worldwide assets of more than ?770,000, should file their wealth tax return (ISF) together with the payment of the liability.
The onus is on the taxpayer to file a return even if this leads to a nil tax liability or if the taxpayer does not have any income. In the absence of a return, the tax authorities may assess up to three years in arrears for income tax and up to six years for wealth tax. When doing so, penalties and an interest charge of 0.4% per month will be applied.
Readers who settled in France last year will need to file their first return in respect of income and gains received from the date of their arrival in France to December 31, 2007. The standard form should be available towards the end of April and can be obtained online at www.impots.gouv.fr or from the local tax office. Once the first return has been processed, pre-printed tax forms are automatically sent to the taxpayer.
Who is tax resident?
Under French domestic law you may be treated as a French-resident taxpayer if you fulfil any of the criteria below:
a) you have your home (foyer fiscal) in France, or if this cannot be determined, France is the place where you spend most of your time, or
b) you carry on your main professional activity in France, or
c) your centre of economic interest is in France.
In cases of a conflict of residence between the UK and France, where an individual can effectively be treated as a resident of both countries under their respective rules, the tie-breaker residence criteria as set out in the France-UK treaty will apply. The criteria below are considered in order so that, if the first one is inconclusive, the following one is applied and so on:
a) Place of permanent home
b) Centre of vital interest (personal and economic relations)
c) Usual place of residence or length of time spent
d) Nationality
e) Mutual agreement is the last resort, if none of the above is conclusive.
A number of facts are usually taken into account to decide the place of the foyer fiscal or taxable household, such as ownership of property in France and use as a main home, utility consumption levels, presence of spouse and children in France, absence of proper evidence of a tax assessment on a worldwide basis in the country where a taxpayer claims he is a resident etc.
French income tax applies to worldwide income (and capital gain), subject to the terms of any relevant double-tax treaty. It is often incorrect to assume that foreign sources of income or gain can simply be omitted from the French income tax return (even when exempt in France under the terms of the relevant treaty). In most cases foreign income or gain will need to be reported in France to determine the overall ‘reference income’ or revenu fiscal de référence, to calculate a number of other charges (such as the taxe d’habitation, CMU contributions) or to assess eligibility for certain benefits. The 2007 French income tax bands and rates, known as the barème de l’impôt sur le revenu, are as follows:
Band of Value (€) Rate of Tax (%)
Up to €5,686 0%
€5,687 to €11,343 5.5%
€11,344 to €25,194 14%
€25,195 to €67,545 30%
€67,546 and above 40%
France is one of the few remaining territories to have an annual tax on assets owned. This applies to non-residents if the net value of their French assets (excluding investments in France) exceeds the limit, currently €770,000. This limit applies on a worldwide basis to residents of France. Married couples and unmarried individuals (living together) are assessed jointly. The onus is on the taxpayer to declare the value of their assets and pay the tax at the same time as filing the return, usually by June 15. Failure to do so can lead to reassessment up to 10 years in arrears. The current rates are as follows:
2008 Wealth Tax rates
Taxable wealth (€) Rate (%)
Less than 770,000 0.00
7770,000 to 71,240,000 0.55
71,240,000 to 72,450,000 0.75
72,450,000 to 73,850,000 1.00
73,850,000 to 77,360,000 1.30
77,360,000 to 716,020,000 1.65
716,020,000 and above 1.80
For further information or to check the availability for the 2008 edition of ‘Taxation in France’ (planned for the end of April 2008) please refer to www.pkfguernsey.com
CSG and ‘social’ charges
In addition to the barème rates, the French tax system applies social surcharges called contribution sociale généralisée (CSG), contribution au remboursement de la dette sociale (CRDS), and prélèvement social (PS), to most sources of income declared by French resident taxpayers. Despite being known as ‘social contributions’ they do not entitle the payer to any health benefits, and in fact represent an additional income tax charge. These charges apply as follows:-
Base CSG* CRDS PS Total
Investment and rental income property
and investment gains (on the net taxable
income declared for income tax) 8.20% 0.50% 2.30% 11.00%
Salaries and unemployment benefits
(on 97% of the gross amounts received) 7.50% 0.50% 0.00% 8.00%
Retirement or Disability Pensions 6.60% 0.50% 0.00% 7.10%
* Part of the CSG (normally 4.2% on pensions, 5.1% on salaries and 5.8% for other income) is deductible from the following year’s taxable income. Foreign pensions and salaries may not be liable to the CSG and CRDS if the pensioner is eligible to continued health cover under one of the DSS forms (E121, E106), private cover or non-French cover. Nevertheless, it is important to note that foreign investment income (interest, dividends, annuities) and gains are not exempt from these
‘social’ surcharges.
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Wednesday, 09 April 2008 |
Who’s been muddying the waters in the Marais Poitevin natural park? Jacqueline Karp wades in to find out
Stand on the windswept Saint-Clément headland overlooking the mudflats of the Baie de l’Aiguillon and you are looking at one of the most important mussel-farming areas in the world, and a major stopover for migrating birds.
Fabien Mercier, environmental representative for the French bird protection league (LPO), is in his element here, pointing out bar-tailed godwits and greylag geese. But he is also angry over Ecology Minister Jean-Louis Borloo’s recent refusal to adopt the charter drawn up to save the interregional Marais Poitevin natural park (PNR) project.
In Roman times, the Marais Poitevin was a vast island-dotted expanse called the Bay of the Pictons. Medieval monks and 17th-century Dutch engineers progressively drained it, and these drained marshes (marais désséchés), wetlands (marais mouillés) and tidal mudflats (estrans) constitute France’s second-largest marshlands after the Camargue.
Geographically, the basin of the meandering Sèvre Niortaise river and Aiguillon bay make up the park area. Politically, it covers three départements: the Charente-Maritime, Deux-Sèvres, and Vendée. Only the Vendée is against the project. It is administered by two regions: Pays de la Loire and Poitou-Charentes, both in favour.
The park lost its label (PNR)
in 1991. In 1999, Brussels imposed
daily fines of E150,000 on the French state for non-respect of its bird protection obligations, as essential wetlands and meadowland were increasingly given over to water-intensive maize and sunflower cultivation, and water table levels sank dangerously low. Jean-Pierre Raffarin managed to cancel the fines provided a new charter was drawn up.
Ségolène Royal, as subsequent president of the Poitou-Charentes region and, at the time, also the park, threw herself into engineering this project. Three years of hard negotiations later, majority agreement between all concerned (farmers, fishermen, wildlife, residents and tourist associations) on water management and land use was reached and backed by a favourable public enquiry. But final stages coincided with the presidential election run-up in which the Vendée’s conseil général president Philippe de Villiers was competing against the Poitou-Charentes president.
Minister J-L Borloo’s veto has caused as much anger as relief. An outraged Ségolène Royal insisted in a communiqué that the Poitou-Charentes, with the Pays de la Loire, would be “taking the matter to the conseil d’état”. Borloo evokes the “legal fragility” of the present charter, which could lead to “problems as great as in the Camargue”.
But Serge Morin, Green Vice-President of Poitou-Charentes, disagrees: “From a legal and water management point of view, it’s all well tied up [tout est totalement calé]. The government had to legislate to protect the Camargue charter, but the Marais Poitevin is totally different.” Until then the Camargue was in the hands of a private foundation, not always willing to cooperate with the charter.
Vice-President of the Pays de la Loire and current park president Yann Hélary sees “electoral manoeuvring” behind the unilateral ministerial decision. “One département [Vendée] says ‘No’ and the minister listens.” Serge Morin agrees that the government’s fear of losing the uneasy alliance with far-right loner Philippe de Villiers in the Pays de la Loire is the real reason behind this gift to Vendée’s patriotic leader. But Vendée’s stance surprises no one. This intensely Catholic and wealthy farming community has, like its president, long gone it alone, despite historic ties with the Poitou. It even has separate wildlife associations.
The Marais Poitevin defence coordinating committee based in Niort has a petition to sign on http://marais-poitevin.org and organised a protest march on March 29. Their president François-Marie Pellerin said: “News of the minister’s decision reached us via a communiqué published in ‘Ouest France’, two weeks before the elections.” “It’s Vendée’s elected representatives who leaked the information to the press,” explained Serge Morin, adding that the conseil régional had yet to be officially informed of the minister’s veto.
Drainage and irrigation have been controlled by user associations since 1646. The current alliance, with the long-winded title of Coordination des syndicats de marais de la baie de l’Aiguillon pour le maintien durable des activités humaines (COSYMDAH), backed by the chambers of agriculture and Vendée hunters, favours a no-change attitude towards human activities. They fear Europe’s Natura 2000 directives to “rehabilitate wetlands”, arguing that the man-made marshlands need constant management. Like the Vendée farmers, they applaud Borloo’s decision.
At low tide, it is easy to see how Aiguillon bay is silting up and advancing vegetation. “Mussel farmers complain about water quality. Not enough. And too polluted,” explains LPO’s Mercier. “It’s no good setting up a governmental ecology think-tank one day and coming up with this pro-intensive farming gesture the next. The minister has halted a process that was working.” Mercier has spent the past three years on the interregional park charter negotiating committee. For him, pesticide reduction and water-friendly land usage choices are essential for wildlife, tourism, oyster and mussel farmers and even the farmers themselves.
Meanwhile, it’s back to the drawing board for all concerned. Serge Morin, sincerely hopes a second three-year stint can be avoided. The préfet of the Poitou-Charentes, designated coordinator of the interregional negotiations, has been asked by Jean-Louis Borloo to reconvene all parties and hammer out a foolproof text.
But foolproof for whom?
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Wednesday, 09 April 2008 |
Nicolas Sarkozy is to commit more than a thousand extra French troops to fight in Afghanistan under NATO. France is at war, in case you hadn’t noticed, and has been for seven years, albeit a very genteel part of the war with hardly any fighting. Just a few bombs dropped.
Now it is about to get a bit more serious. We do not yet know for sure whether the 8th Parachutist Regiment from Castres will be in support or actually, like the Americans, Canadians, Dutch, New Zealanders and British, fighting the Taliban. It is known that some of the troops will be Special
Forces, withdrawn from Afghanistan in January 2007 by Président Chirac.
Ever since Général de Gaulle withdrew French troops from NATO command, it has been French policy to be with NATO but not a part of it. The general’s view was that there would be no European defence worth the name as long as European armies were locked into an alliance where the United States called all the shots. For the same reason, he sabotaged the birth of the European Defence Community in 1954. As a soldier and president, he was shocked by the weakening of loyalty to the government which he perceived among French generals at the time of the Putsch in Algeria. He blamed participation in NATO for this.
Like his illustrious predecessor, Sarkozy has made it clear that he wants to build up European defences under European control. So why is he sending French troops to Afghanistan, of all places, and under NATO command? He made a surprise visit to the 1,900 French troops in Afghanistan, mostly on training missions, on December 17. Before the elections, he said he saw no reason for French troops to linger in the country.
On his visit to Kabul, he changed tack completely, saying, “There is a war going on here, a war against terrorism, against fanaticism, that we cannot and will not lose.”
Sarkozy must realise that many commentators would dispute practically every word of that sentence. Éric Margolis, the award-winning war correspondent and author of ‘War on top of the World’ is an expert on Afghanistan. He calls it a contested occupation of the territory of the Pushtuns rather than a war. It is more about oil pipelines from Central Asia than terrorism. Until the US invasion of Afghanistan,
there was no known example of a suicide bombing by
an Afghan.
Nobody knows quite what winning means, but to say that we cannot lose seems optimistic. Obviously we can lose the war in Afghanistan, just as everybody else has, from Alexander the Great via the British Raj to the Soviets. And it may mean the end of NATO in its present form if and when we do.
Sarkozy’s aims are no different from de Gaulle’s but he believes in the need to be on good terms with his American ally. Constant friction with the United States makes it difficult to get the growth in business and exports that France so desperately needs.
The world’s greatest military and economic power has made it difficult for France internationally in the recent past. In the 10 months of Sarkozy’s presidency, France has stepped up its sales abroad of nuclear power stations. The previously unmarketable Rafale fighter aircraft is suddenly breaking into the North African defence market and the Pentagon has awarded EADS/Airbus a huge contract for refuelling planes for the American Air Force. Is it a coincidence that in the same period France has for the first time vigorously supported the United States against Iran and is now to prop up the ailing war effort in Afghanistan, despite the risk of attracting the undesirable attentions of Muslim terrorists? It looks as if a deal has been struck.
Ironically, France has not antagonised the Russians while pleasing the Americans by fighting the Taliban. The Russians are happy to watch the West now struggling to achieve in Afghanistan what they failed to do, thanks in part, to Western sabotage. Sarkozy may be backing NATO to be friends with the United States but he does not want to upset
the Russian government. Cooperation, particularly in aerospace, is very important. Russia is also a lot closer to Europe than America and is a vast, growing market.
The French president is much more cautious about the US obsession with getting missiles into Poland and Czechoslovakia and getting Ukraine and Georgia into NATO against Russia’s wishes. His statement, that he would like France to become a full member of NATO once more, is qualified by the condition that in Europe at least, it must be a different NATO. In particular, the commander-in-chief should be a European… and why not a Frenchman? Sarkozy will be conducting a delicate balancing act at the April NATO summit conference in Romania, to be attended by both Bush and Putin.
France has, for the first time, vigorously supported the United States against Iran and is now to prop up the ailing war effort in Afghanistan
Sarkozy has made it clear that he wants to build up European defences under European control. So why is he sending troops to Afghanistan?
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Wednesday, 09 April 2008 |
The World Health Organisation has issued a report warning of the growing menace of a strain of tuberculosis which resists the usual treatment, known as multi drug-resistant TB (MDR-TB). Cases in the European Union have been reported in Estonia where a quarter of the declared cases are now classified as MDR. The WHO estimates that there are 9 million cases of TB every year and of these 400,000 are MDR-TB. The great majority of these cases are in the former Soviet Union, China and South Africa, where two hospitals have razor-wire fencing to prevent inmates from escaping and spreading the disease.
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