May 2010

RHAPSODY IN TRUTHS


We have to question how many truths can exist when common sense tells us that there is only one: the true one.

After having lived in France for a long time, a foreigner begins to understand that this rock solid concept of truth being unique is continually challenged in France. Withholding information is common here, and is typically done without an ounce of meanness most of the time. When Paris City Hall states that it is working for the best interest of the community without adding that it is helping an industry, does this constitute lying?

Perhaps the French are capable of composing truth in as many ways as they compose music.


SHORT-TERM RENTAL: THE FINAL EXPLANATION!
After months of searching for information and, even more, for explanations, I finally got to the bottom of this issue.

Paris’s City Hall is directly sponsoring the B&B industry in Paris, with which they intend to replace the short-term rental. I believe the reason behind this decision is that the B&B industry is quite regulated, with known, registered companies running the lodgings. In other words, the political authorities believe the public is better served by an official organization than by small and less regulated organizations.

While I could question whether this assumption is accurate, especially since opinions on this subject in France and the USA are so different, it no longer matters. What is important is that there is no more room for speculation about what will really happen. Since there is now an official alternative, the policy regarding short-term rental is to get rid of it completely in Paris.

This information came to me through the following message from one of my clients:


MY CLIENT
“ Today, I received an email from another agency who had contacted me quite some time ago asking if they could represent my property and although I said no, she and I have remained in contact. Below, you will see what she sent me:”

THE AGENCY
‘You must be aware that the city hall and the prefecture have made seasonal rentals illegal in Paris since almost 6 months. There is a big lobbying against this on the part of agencies like us but the hotel lobbying is huge too. The new law states that owners are liable to 25 000 euros fine if “discovered”. They have inspectors starting to chase these types of rentals and some prosecutions are already in the pipeline but so far they are mostly based on denunciations. It is not a pretty sight and a very frightening situation for owners and agencies alike.

‘I have not issued a memo to owners yet because it is very difficult to get information on the situation at the moment. So the bottom line is that you must be very careful to work alone or via agencies that advertise the full address of your apartment (we do not disclose this info until full reservation payment).’


"I was actually very surprised, and frightened actually, to hear the mention of the 25,000 Euro fine as this is new information and in all the time I have heard this issue raised, a large fine such as this had never been mentioned. But quite possibly that is because it was information provided to me by an agency, who represent owners such as myself, who have been ‘filtering’ information to me and of course would not want me to know this.

Again, don’t shoot the messenger. I’m simply fulfilling my promise to you to pass along any new information that I hear for your knowledge and benefit."



Another client told me that the Paris City Hall had announced a plan to double the fine from 500 euros to 1,000 by 2011.

Then there was the address of a website presenting the organization “Hôtes qualité Paris,” whose pages are available either in French or English. The English version says:



The official site of Paris Quality host
Guest friends. Parisian friends, you have access
1 – To Paris Quality Hosts’ selection of the best B&B marketed by professionals
2 – To our Parisian secrets to discover a unique Paris, its events, its trendy addresses

Enjoy your visit to our Parisian B&Bs

Jean-Bernard BROS
Assistant Mayor, in charge of tourism

Chantal GOLDSTEIN
President of the Associated Parisians



I believe everything is now clear: there is no hope that the situation will ever get better for the owners of apartments used for short-term rentals. I have not done any research yet, but it might be interesting to contact the “official” companies running B&Bs in Paris and ask what it takes to be in compliance with their requirements.


AVIS A TIERS DETENTEUR (A.T.D.) DISTRAINT ON A BANK ACCOUNT – HOW TO HANDLE A TAX BILL
In recent months two of my clients have had their bank accounts frozen by the French tax office through a procedure called an avis à tiers détenteur (A.T.D.). One would hope this could always be completely avoided. Unfortunately, I do not think anybody can be assured of never triggering such a situation. A lot of important details can easily be overlooked, especially for a foreigner who does not understand the way the tax authority works in France.

Normally, there is a gradation in the tax office's actions. First, you receive the tax bill. Then, if you do not pay the bill, you receive in the mail a couple of summons to pay, the second of which is almost always a registered letter.

If this happens, then you are fully aware that you have not paid, and there can be many good reasons for that. One is that you disagree that you have to pay the tax bill. Nevertheless, even when you clearly do not owe the taxes because, say, the bill is based on erroneous information, you are still liable for the amount in full; in the meantime you have to ask for the initial bill to be declared null and void. This can take a fair amount of time, since the tax inspector may need to review the complete file before agreeing to change his/her mind.

Another factor that makes fighting a tax bill in France quite complex is that there are two totally different tax divisions, which have little contact with each other: the centre des impôts (C.D.I.) calculates the tax and the trésor public collects it. As the collection agency is seldom in direct contact with the C.D.I., even if you are on the verge of being successful in your dispute you can still be harassed to pay. The most efficient course is to immediately write a clear and detailed letter to the C.D.I., enclosing everything you can think of to support your case. At the same time, send the trésor public a copy of the letter and a plea to suspend collection. If a miracle happens, you will not have to pay right away and the bill will be null and void before the trésor public starts demanding payment.

What usually happens is that the collection agency starts adding a 10% fine after the deadline, and sends second notices. When the bill is cancelled, only the main amount is declared null and void; you then have to request that all the fines, fees and interest generated by the incident also be nullified. Since you were right to dispute you will get some of them cancelled but never all of could have been entitled to be reimbursed, as taxes, fines, fees, and interests!

I cannot stress enough that having a reliable address where you can receive all your mail is absolutely essential in France. It is also crucial to use the mail forwarding service to its full extent. Doing so will drastically limit the risk of such a thing happening, as well as avert many other horror stories.


FRENCH INCOME TAX DECLARATION DUE BEFORE MAY 31st
Regarding the more mundane topic of income declaration, I remind everybody that it must be filed in France before May 31st.



Best regards,

Jean TaquetJean

Q & A

MOVING TO FRANCE WITH AN E.U. SPOUSE

QUESTION
As I plan to move from Italy to France in a month or two, I would like to be aware of problems other people are experiencing. I am an American married to an Italian and working in Italy as an IT consultant and my Italian residence permit is family-based: “married to an Italian national - E.U.” I take it that I cannot just pack up and go to France to look for a job. I understand I could easily join my wife if she chose to move to France but matters would get much more difficult if I had to settle in France first and have her join me later, which of course would be the right way to do things. What is the best scenario for me to settle in France?



ANSWER
I often use the image of a tractor-trailer to explain the procedure you are about to start since the trailer can only ever follow the tractor. First, E.U. regulations grant all E.U. citizens the right to live in any member country. As the E.U. respects matrimonial ties, there is always a procedure for a non-E.U. spouse to acquire full residency status.

Thus, there is only one logical, legal scenario: you move at the same time or slightly after your European spouse so that she establishes her right to live in France and you link your request for legal immigrant status in France to her stay here.

The alternative is to immigrate on your own merit. This would require you to get an immigration visa based on your American citizenship and your ability to survive in France. To achieve this, you need to prove you can move your IT business and continue to be successful. You would not fall under E.U. regulation even if you explained that your Italian spouse would be arriving a couple of months after you.

Your ideal immigration scenario can be quite difficult to explain to the authorities, even though there are often excellent reasons for the national spouse to stay in the country of origin and settle up there while the other spouse starts the process in the new country.

Under the current regulations, I see two possible ways to facilitate this scenario. One is for your spouse to start the process of moving to France, which also allows you to get into France, and then she goes back to Italy and finishes business there. The other is to use an Italian employer or your Italian business to sponsor you in France, since trade is totally free between the member countries.

The E.U. citizen starts the immigration process
It is relatively simple for an E.U. citizen to start the immigration process. The three main requirements are financial means, health insurance and lodging. The prefecture will want to know why the person is moving to France, whether it is to start a job with a French employer, open a new business or study. If no specific reason is provided, the E.U. citizen must stay in France more than three months in order to be seen as a French resident. This delays the whole process.

The American citizen prolongs his Italian residency
This solution, which can be difficult to grasp at first, can be summed up this way: You are physically in France but whatever work you do is cleared through a business in Italy. As an American you can get in and out of France without attracting much attention. Officially you are still an Italian resident and for business reasons you need to travel and stay in France at times to deliver some services.

This status should not last very long, but it lets you anchor your relationship in France in a practical and administrative way. Make sure you put everything in both of your names. This way, when your spouse is ready to come to France, you can go back to Italy and ask for an immigration visa based on her settling in France, which can be proved with utility bills, among other things.

Transitions are never easy and this is no exception. On the other hand, when it is properly done it helps the settling in quite a lot.

One last thing: it is possible for an American citizen married to an E.U. citizen to acquire French residency without asking for an immigration visa. But I want to be clear about this: it means you will start with illegal immigration status when you submit your request to the prefecture. Since you can thus avoid going back to Italy to wait for the visa to be issued, you may be tempted to apply this way. The prefectures are quite lenient regarding this procedure and there is no risk of being denied or hassled.

As you can see, no matter how you handle the everyday issues and practical matters, from an official point of view your spouse will always appear to be the tractor and you the trailer, following her lead.




PRENUP AND DIVORCE IN FRANCE

QUESTION
I am American, and would like buy a house in France with my French husband. At the moment we are thinking of choosing French law to govern our marriage, in which case we have to declare a matrimonial regime.
I am concerned about the outcome of a possible divorce and I would like to know the differences, in case of divorce, between séparation des biens (i.e., total separation) versus communauté réduite aux acquets (i.e., partial community) versus communauté universelle (i.e., Californian community property/universal community). My husband makes a lot more than I do and we have several sources of income. Making sure my name is mentioned on all assets can be complicated and tedious and I think it is likely I might not pay sufficient attention to this. So I would appreciate your comments regarding what can be done to protect me in case of divorce.



ANSWER
The matrimonial regime is often the subject of a major misconception, and people do not understand what it does. People almost always relate the prenuptial agreement with divorce, and therefore want the prenuptial agreement to address the consequences of divorce. While it is true that a well-written prenuptial agreement facilitates the splitting of assets and debts, among other things, in case of divorce, it is not really meant to do that. This legal document essentially just addresses one key issue:

“WHO OWNS WHAT & WHY?”

When the couple expresses no preference, then the law determines by default the aspects of the marriage having to do with the couple’s assets and debts. This is the legal reality in most countries.

Because the prenuptial agreement deals with this issue, it has a crucial effect on the consequences of divorce. By determining how assets and liabilities are split between the spouses during the marriage, it also facilitates their division in a divorce. It has the same effect on the definition of the estate or of the ability to give assets as a generation-skipping gift.

The choice of the marital regime depends on the nature of the work done by the spouses as well as their personal dynamic. One choice does not fit all, by any means.

That being said, for the vast majority of people, a community regime makes more sense – either partial community, known in France as communauté réduite aux acquets, or universal community such as that familiar in California as well as the Germanic and Scandinavian countries. This is true because most people do not need the extra protection that comes with the separation regime, and have a daily life of significant sharing of emotions, decisions, and finally assets and liabilities.

Let me try to describe each of the three types of regime so that the mechanics of each is clear.

Total separationséparation des biens
I call this the “two bag” regime. Under this system, wedding creates no joint ownership at all. Everything is owned according to its status when it was purchased. Any purchase jointly made or liability jointly incurred is divided between the two bags.

The main advantage and security that comes with a total separation regime is that when one spouse runs a business and therefore can incur huge liability, the other spouse can be declared owner of all major family assets – house, savings, and so on – in such a way that if there is a financial disaster, the family is protected.

The main risk lies in the financial imbalance intrinsic to this type of contract. If the couple does not make sufficient effort to correct this imbalance, the wealth will be unevenly divided throughout the marriage. In a traditional setting, the husband needs to give the wife money to cover daily expenses and to balance the stream of income more evenly. But this does not happen as often as it should with this regime.


Partial French community communauté réduite aux acquêts
I call it the “three bag” regime. The wedding creates joint ownership of all assets and liabilities thenceforth acquired or incurred. Each spouse keeps separate ownership of the things owned or acquired before the wedding, plus any inheritance coming after the wedding (because in France you generally inherit from blood relatives so the right exists from birth).

The main advantage is that, since the community is created by the wedding, the natural consequence is that as time passes the common assets and debts grow, thus automatically protecting the financially weaker spouse.

The main risk with this regime is that unless the spouses scrupulously document their use of the personal money and other assets that they had before the wedding, there is a natural tendency for the separate assets to blend with the common assets and debts, and before you know it only the few things that had a title or proof of origin stay personal.


Universal community communauté universelle
I This is the “one bag” regime, in which the wedding creates joint ownership of everything each spouse owns. To define the assets and the liabilities of one spouse, you take 50% of what is in the bag.

The main advantage is that it greatly simplifies issues related to ownership, gifts and debts.

The main risk is that it can considerably reduce the assets of the wealthier spouse, especially when the marriage lasts only a few years. There have been movies made about this, since California law requires this kind of regime and the movie industry is still mainly based there, which implies a lot of very wealthy people and the prenuptial reflex when one gets married in that state.

Now, no prenuptial agreement or marital regime will ever address the issue of divorce properly, since by its very nature it is not about settling in advance disputes arising from a legal separation.

Given the way you have presented your situation, you would be much better off addressing this issue in stages.

1. What regime do you choose and why?
The best reason I can think of for choosing universal community is if a couple runs a business together and shares everything. The protection aspect does not interest them but the idea of having maximum leverage with their personal assets is essential. This analysis is often totally overlooked and I like the idea that couples can address such a difficult issue before the wedding.

2. What personal modifications to a standard contract would you want, for instance, about the contribution of the spouses to the finances of the household, the choice of the family home, and so on? It is not always necessary to significantly alter the template; the main thing is that if the couple comes up with some ideas for specific provisions in the contract, it means they have discussed the issues, which is an excellent thing.

3. What guidelines would you need to follow in case of divorce regarding:
a) the guardianship and the education of the children, including either joint custody or visitation rights

b) the use and the ownership of the family home

c) alimony and child support


Here, on the contrary, I have strong objections to writing things so they are too specific. In theory, the idea is excellent and would avoid many disputes. But as it happens, this set-up does not really work with international marriages, since the consequences of divorce (and the settlement of estates) differ greatly from one country to the next. This means the prenuptial agreement could make excellent provisions for one country that will be declared null and void by lawyers or judges in another country. And yet, if the provisions are so vague that they fit all possible legal systems, they are probably not worth writing. This issue can quickly become a huge can of worms with international marriages.

Therefore, I advise you to stick with the fundamental purpose of the prenuptial agreement and choose the regime that fits your couple best. Then, once this is done, if you wish to add things to it, get the help of an excellent lawyer and put in the provisions you believe will help you as a couple and as a family, including dealing with a possible divorce.