Franco-British tax treaty of 1968
Hello,
First sorry for my mistakes in English, I just wanted to clarify the tax situation in France of British citizen pilots who works for a Uk based company in international trafics.
Under the terms of the Franco-British tax treaty of 22 May 1968, salary ared taxed in the country where the activity is carried on except in case of temporary mission (there are three conditions in this case: work less than 183 days a year in the other country etc...), in which case the salary is taxed in the country of residence. A provison of the tax treaty provides an exception to employees who work for a company in international trafic (pilot, steward,etc..).
Pilots and stewards working in international trafic are taxed in the country where the company is based.
Therefore pilots who are resident in France and who work for a Uk company are exempt in France on their salary. But this salary is taken into account in order to determine the rate of taxation applicable to their French taxable income.
The problem for the French tax administration is that under english law, the non residents are taxable only in the fraction of the income which is introduced in the UK. This entertain that pilots working for British Airways, Virgin benefit from a double exemption!
Many pilots became resident in France only for this purpose.
France and the Uk have signed a new tax treaty which is not yet in force. Under the terms of the new treaty, the method of taxation remain the same but the method to avoid double taxation will change. France will not use the method of the "taux effectif" which results to a double exemption. In case of double taxation, France will grant a tax credit which is equal to the British income tax. As there is no British income tax or a few, there will not be anymore a double exemption.
That is the reason why many of our clients who are pilots have begun to move and go away.
France will no more be a tax paradise for british pilots. But nothing for the moment is certain untill the new treaty enter in force. Maybe they have amended the original new treaty.
The rule of the 2/3 applies for French tax residents who works abroad. There are a total exemption or a partial exemption but both are ruled by strict conditions.