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Minister insists France not ‘totally bankrupt’

France’s finance chief Pierre Moscovici has launched a staunch defense of the country’s economy after a minister in the French government described it as “totally bankrupt”.

Published: 29 January 2013 14:53 CET

Minister insists France not 'totally bankrupt'

Photo: Joel Saget/AFP

Moscovici was responding to the comments made by Labour Minister Michel Sapin on France’s Radio J on Sunday, when he echoed former PM’s Francois Fillon’s famous declaration in 2007. Sapin also insisted the country had to reduce its gaping public deficit.

After Sapin’s comments sent minor shockwaves through the corridors of power Moscovici took on the job of trying to allay any fears.

“What he meant was that the financial situation is worrying,” said Moscovici in the Nouvel Observateur. “It was worrying in 2007 and it is even more worrying now because France has accumulated 600 billion euros of public debt.

“But the term ‘bankrupt’ is not totally appropriate because we have no need to close public services on a massive scale.

“France is a truly solvent and a credit worthy country which is on the road to recovery,” he added.

Faced with an economy on the brink of recession and rising unemployment, President François Hollande is betting on a mixture of reforms and public investment to give a boost amid an uproar over proposed tax hikes, especially on the rich.

France's 2013 budget is based on meeting the EU public deficit limit of 3.0 percent of gross domestic product, as required by Brussels, but with growth expected to fall short of forecasts, many analysts doubt that this is now possible.

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Explained: France's exit tax

Like some other European countries, France does have an exit tax for those (French or foreign) who are leaving the country. It’s known by the English name l’Exit tax.

However, it won’t affect most people.

Only those who have been tax resident for a minimum six years of the 10 years immediately before they permanently move out of the country are liable to pay an exit tax – if, that is, they own property, titles or rights worth a minimum of €800,000, or that represent 50 percent of a company’s social profits.

If that affects you, the best advice is to seek expert individual financial advice before moving out of France for good. The relevant page on the French government’s impot.gouv.fr website says it is possible to defer payments, and some relief is available.

Because of the relatively high figures involved, this tax is irrelevant for most people. That said, however, you will still have to inform tax authorities that you are moving out of the country because you may still have income, property and capital gains taxes to pay.

Income tax

You must inform the tax office that you are moving and give them your new address so that your tax declarations can be transferred to your new address.

You are liable for tax on everything you earned in France prior to your departure as well as on any French earnings that are taxable in France under international tax treaties that you earned after your departure.

The year of your departure, you declare your previous year’s earnings as normal – declarations in spring 2024 are for earnings in 2023.

A year later, you will have to declare any earnings taxable in France from January 1st up to the date of your departure, and any French-sourced income taxable source until December 31st of the year of your departure.

If you continue to have any French-sourced income – such as from renting out a French property – you will have to declare that income annually, using the non-residents declaration form.

Property taxes

You will have property taxes to pay if you own a French property on January 1st of any given year – whether it is occupied or not.

Property tax bills come out in the autumn, but they refer to the situation on January 1st of that year, so even if you sell your property you will usually have the pay a final property tax bill the following year.

Moreover, if you receive income from property in France or have rights related to that property (such as shared ownership or stock in property companies), as well as any additional revenue connected to the property, during the year you leave France, you will be required to pay taxes on these earnings.

If any property assets in France exceed €1.3 million on January 1st of a given year, you may also have to pay the wealth tax (IFI).

READ ALSO What is France’s wealth tax and who pays it?

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Capital gains tax

If you sell your French property or share of a French property, you may be liable for capital gains tax at a rate of 19 percent. It will also be subject to social security contributions at the overall rate of 17.2 percent.

Capital gains tax varies depending on how long you have owned the property and whether it was a second home or your main residence.

READ ALSO How much capital gains tax will I have to pay if I sell my French property?

The good news is, if you move to another EU country, or any country that has a specific tax agreement with France, you may be exempt from capital gains tax for non-resident sellers on the sale of a property that was your principal residence in France.

If you move elsewhere, you may be able to claim exemption on capital gains tax up to €150,000. As always, you should seek expert financial advice.

Tell Social Security

Inform social security that you are leaving France permanently – and return your carte vitale if you have one. If you do not, you may be liable for any benefits you receive to which you are no longer entitled.

More mundane tasks involve informing utility and water companies, your internet provider, if you have one, the phone company, your insurance companies, banks – and La Poste, who will be able to forward your mail for up to 12 months, for a fee…

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