I had previously touched on some of the questions raised here so apologies if repeating myself here!
Myself and my wife are planning on buying a property as a second residence in France to use mainly for holidays, possibly also to let out when not there and possibly (not decided yet) run a small Chambre d’Hotes when we are there, which would be for less than 6 months per year.
That aside, my wife also has an online business.
This is a UK registered business in which she designs and sell digital print designs that are available as instant downloads (and also physical products via P.O.D - Print On Demand) via other online platforms. Most of the time, she has no direct interaction with the customers, although when traffic increases to her own site, she may have more interaction with customers. At the moment though, the designs are sold as is and any queries are handled by the third parties that she sells on.
We would plan only on being in France at a second holiday residence around 4-5 months of the year, possibly split into 2 periods of 2-3 months, with our main residence in the UK.
Regarding French tax for this online business, I understand that Impots look at 3 things:
1. Where you live (i.e. spend more than 6 months per year).
2. Where you work from.
3. Where the activity takes place.
I know in some cases it could be argued that if most of the activity is done in the UK, if the storage and fulfillment of the orders takes place in the UK, then she may not be liable for tax. In this scenario though, fulfillment of the orders occurs in both digital format and also in a physical item, and also all over Europe, UK and the US. In theory, the majority of business comes from the UK and US, but it varies and can’t really be estimated accurately.
My question is what defines ‘activity’ on this business during the time spent at what is essentially a holiday home in France?
It seems that there is some obscurity over what would constitute work on the business. For example, if she opens her laptop to even just check the sales from her UK business when in France, is this considered work? If she answers just one email or creates one design, is this considered work?
If income is passive over the time that she stays in France, i.e: she wouldn’t do any design work at all, having done it all during the time at the main UK residence, but it still generates income on its own without any input from her whilst in France, is she still liable for tax in France?
What if she does need to do some online work on the business whilst in France? What defines ‘work’ on a business that means she would have to pay French tax on it?
1. If any work is done, does it need to be a limited amount or for a limited number of hours? Per day? Per week? Per year?
2. If any tasks are performed for the business, – which tasks then would be considered as work for the business?
c) Website maintenance?
d) All or anything?
3. Does turnover that is generated from the UK company earned whilst in France affect tax liabilities in France? e.g: if performing any of the above tasks are deemed to be working in France, if the turnover created from her time in France is less than a certain amount e.g. €5000 during the period within that tax year that she is in France, would she be tax exempt?
We are just trying to figure out the best scenario so that we can adapt to it in advance. As a reasonably young business the French tax would eat into any profit at this stage, even under Micro-Entreprise, and ironically, it could be the case that it may be more profitable to do no work whilst in France… As a design business, where does she stand?
What would be the best solution?
4. Do no design work at all – if this is the case and no absolutely design work is done, but she just open her laptop to check sales, is that considered ‘work’?
5. Do minimal design work, eg: less than a certain quantity or number of hours?
6. Do some design work but only upload this to sell online when in the UK?
Any help or advice on this would be greatly appreciated.