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Taxes in France: a guide to the French tax system

Updated: Sep 14, 2022

After you become a resident of France, you will be required to pay taxes there on whatever income you earn elsewhere in the globe. Even though it is one of the most generous social security systems in the world, the French system is one of the most expensive to maintain because of the high social charges and taxes.


The tax system in France may be difficult to understand and manage. Keeping track of everything that has to be paid in taxes, whether it be income taxes, social security payments, or taxes on goods and services, may be challenging. You can, thankfully, steer clear of the majority of the more significant problems as long as you do enough study and consult with specialists when appropriate.


This tax guide for France just provides a foundation; instead, you should consult a tax professional about your specific financial predicament.


Elitax


The services offered by Elitax include the complete gamut of tax advice, guidance, and support, and are tailored to suit the unique requirements of each expatriate living in France. During in-depth personal consultations, their major emphasis is on assisting expats with filing their income and wealth tax returns. During these meetings, they advise expats on how to position their returns, how to prepare them, and how to process them. In addition to these services, Elitax offers tax representation, tax training, and tax audit help. The fiscal regime applicable in France


In France, there are three primary categories of personal taxes, which are as follows:


● French income tax (impôt sur le revenu)

● Social security contributions (charges sociales/cotisations sociales)

● Tax on goods and services (taxe sur la valeur ajoutée TVA, or VAT, in France)


In addition to it, you are obligated to pay the French property tax (taxe foncière) or the occupier's tax (taxe d'habitation). There is a possibility that you may be subject to capital gains tax if you are selling land or property, or if you have assets worth more than €1.3 million.


PAYE system


Pay-as-you-earn, sometimes known as PAYE, is the taxation method that has been implemented nationwide in France as of 2019. You are going to be taxed at the source of the income, in the form of monthly payments, rather than having to file an income tax return and pay any taxes that you owe for the previous year.


Other types of income, including retirement income (such as pensions or annuities), income applicable from abroad, leave income (such as for sickness or childbirth), rental income, and income from employment leave are all subject to PAYE.


Federal taxes in France


The French imposed a significant number of taxes. Whether you are a resident of France or earn your living there, you can be required to pay taxes on several different things, including the following:


● Personal income on an annual basis

● Investments

● Corporate or business income

● Inheritance

● Property

● Wealth

● Purchased goods and services


If you don't intend to hire an accountant, you should make sure to do an in-depth study to ensure that you won't have to deal with any fines or other penalties.


Local taxes in France


Local residence tax: taxe d'habitation


Homeowners in France were obligated to pay a local residence tax in the past. This tax is a kind of local community tax that is paid to the person who is living in a certain dwelling on January 1 of each year.


The tax on properties that are the owner's primary home was eliminated in 2021. This change took effect immediately. Therefore, if you own two residences in France, you will be responsible for paying tax only on the one that is not your primary residence.


The total amount of this French property tax is determined not only by the size and condition of the home but also by the rates that are established by the commune in which the home is located.


A French taxe d’habitation packet


TV license tax


Even if you just use your television to watch DVDs, you are still required to pay the redevance audiovisuelle tax of €138 in 2022 for having one or more TVs in your home since it is only charged once. This tax is included on the same tax statement as other French taxes. In France, you are required to state on your yearly tax return that you do not have one even if you do not have one.


Taxes on goods and services (VAT) in France


Taxe sur la valeur ajoutée, sometimes known as TVA (which translates to "value added tax"), is a consumption tax that is added to the final price of various products and services. Twenty percent is the normal TVA rate that applies in France. However, there are lower TVA prices in France for some medications, public transportation, hotels, restaurants, and tickets to athletic and cultural events (10%), food and books (5.5%), and TV licenses and newspapers(2.1%).


Can you get a refund on VAT?


You could be eligible to apply for a VAT refund even if you don't live in one of the member states of the European Union. The procedure may be time-consuming, but to qualify, you will need receipts for things that you have purchased that have a combined value of at least €100.01 or more. Additionally, all of the items must have been purchased on the same day from the same retailer.


Before you leave the shop, be sure to ask for the Detaxe form, and while you're there, inquire as to whether or not they have a tax return counter where you may collect the VAT refund right away. In such case, you should bring the Detaxe together with your receipts to the VAT counter at the airport, where you should be able to finish the procedure before checking your luggage or going through security.


Who has to pay tax in France?


If any of the following apply to you, you must pay taxes in France:


● Your primary or primary place of abode or home is in France. Even if you are employed outside of France but have a home and children in France, you may still be regarded as a tax resident of France.

● You have lived in France for more than 183 days within a single calendar year, even if these days were not necessary for a row.

● Your primary place of employment is in France.

● The majority of your large assets are located in France.


French tax refunds and credits


Refunds, allowances, and concessions on French taxes might potentially enable you to pay a lower amount of tax overall. These may include the following:


If you are employed in a professional capacity and your income falls below a particular threshold, you are eligible for the premier pour l'emploi, or PPE.


● Contributions made by employees to social security systems

● Any costs directly connected to your profession or work (up to €12,305).

● If you care for someone who is above the age of 75 and live in your home:

● Losses in rental income from unfurnished houses (up to €10,700)

● Expenses incurred as a result of commercial or professional activities

● Payments of child support for children who are not members of your financial household

● The practice of energy saving may benefit your house.

● If you purchase an assurance vie investment insurance or make a contribution to one, your money will be invested there.

● You may be eligible for a reduction in the amount of municipal property taxes that you are required to pay in France if you have a modest income.


The French tax system for foreigners


On income obtained from sources in France, non-residents of France are subject to taxation. Therefore, you will be subject to taxation on that income even if you do not permanently reside in France but you do work for a firm that is based there. Having said that, France does have tax treaties with several other nations, which allow citizens of specific countries to avoid paying taxes in both their home country and in France.


France is one of the nations that has joined the Automatic Exchange of Information (AEOI) initiative, which intends to combat tax evasion by mandating that financial intermediaries be open about the tax residency of their customers in countries that have joined the initiative.


Income tax in France


The income tax rates in France change depending on several factors, including whether or not you are married, whether or not you have children (and, if so, how many), as well as your level of income, and whether or not you are self-employed.


Personal income tax rates for residents


Official residents of France are required to pay taxes on their global income, which might include earnings from a variety of sources, such as work, investments, dividends, bank interest, pensions, and property. The following table details the income tax rates that will be in effect in France in 2021 and 2022:


2021


French income tax bands


French tax rate Up to €10,084 = 0%, from €10,085 to €25,710 =11% €25,711 to €73,516 = 30% and from €73,517 to €158,222 = 41% €158,222 and above = 45%


2022


French income tax bands


French tax rate


Up to €10,225 = 0%, €10,226–€26,070 = 11% €26,071–€74,545 = 30%, €74,546–€160,366 = 41% €160,367 and above 45%


Personal income tax rates for non-residents


The minimum French tax rate for non-residents is 20% for French-derived income up to €27,519 and 30% for income that is beyond this level. Non-residents are required to pay tax on their income sourced in France at this rate.


How to submit your tax return for the current year in France


Because of the PAYE system, once you get a new monthly wage, you will immediately and in real-time be required to make payments toward your income tax liability.


In general, the PAYE system does not apply to income derived from investments (including earnings from life insurance policies), capital gains derived from financial assets and real estate, and income derived from sources outside of France.


Filing general tax returns


If you have already filed an income tax return and are now required to file another, the IRS will most likely send you a form that has already been filled out and require you to review it, make any necessary corrections, and then file it again. If you do not get one or if this is your first time, you may obtain one at the local tax office (center des impôts) or mairie, as well as online via the website of the French Ministry of Economy and Finance.


Even if you believe that your income will be below the level at which you are required to pay any French tax, you still should ensure that your French tax return is filled out and submitted on time.


Deadlines


The following are the due dates for filing your tax return in France in 2022:


● The deadline for mailing in returns is May 19.

● The deadline to submit applications online is May 25 for residents of départements 1–19 and those who live outside of France.

● 31 May: online deadline for départements 20–54

● 7 June is the cutoff date for those residing in départements 50–101 and overseas France can vote online.

● If you miss the deadline, you will be subject to a penalty equal to 10% of the amount that you owe in taxes.


France's tax on income from self-employment


In France, if you are self-employed and the only employee (for example, a freelancer), you are considered a micro-entrepreneur, and you benefit from a tax status that greatly simplifies the requirements for filing taxes and keeping accounting records. This is because micro-entrepreneurs are exempt from paying social security and unemployment insurance contributions. This indicates that you will be required to submit your income taxes using the usual personal progressive rate brackets.


However, if you own a larger business that does not qualify as a micro-entrepreneur, you must file your taxes using the normal regime réel. Under this system, your income tax and social security contributions are calculated based on your profits, and the appropriate business costs are deducted from those profits.


Filing US taxes from France


Even though every citizen of the United States and holder of a Green Card is required to submit a tax return with the Internal Revenue Service (IRS), many people who live outside the country fail to do so. Many people are ignorant of these responsibilities, and they mistakenly believe that as an expat, they are exempt from paying taxes or filing tax returns in the United States. You do! You may find further information in our guide to filing US taxes from abroad if you need assistance submitting your US tax returns from France.


Tax on property and wealth in France


French property tax: Taxe foncière


Even if you rent out your French home, you are still required to pay the taxe foncière (French for "property tax") whether you are purchasing a property in France or already own one there. The taxe foncière bill is often sent out during the last three months of the year, and the amount due is calculated by multiplying the property's expected yearly rental value by a percentage that is determined by the commune (ask for more information at your local mairie). You have the option of paying the tax in advance or installments via a monthly automatic debit.


The rate of taxe foncière for the main residence is around 1%, while the rate for a secondary property is 3%. Similar to the taxe d'habitation, it also contains the additional prélèvements pour base élevée et sur les maison secondaire tax but no tax relief is granted for children. In addition to this, you will need to make arrangements for insurance in France.


Waste collection


The Taxe d'Enlèvement des Ordures Ménagères (TEOM), which is how a community charges for garbage collection services, is often charged alongside the taxe fonciere. While some municipalities choose to pay for this service via their general budget, the majority of jurisdictions choose to instead charge the local population.


French capital gains tax


On the sale of buildings, land, and shares, the French government collects a tax known as impôt sur les plus values (tax on capital gains).


Gains and income from savings and investments are subject to a single, simplified tax rate of 30%, which is calculated by adding together the individual tax rate of 12.8% and the social charge rate of 17.2%.


The overall amount of the capital gains tax on the property is equal to 36.2%, which is comprised of an income tax of 19% and social charges of 17.2%.


French wealth tax


The wealth tax on financial assets was eliminated in France in 2018, and it was replaced by the IFI (Impôt sur la Fortune Immobilière) tax, which is exclusively applicable to assets related to real estate. The following is a list of the several levels of wealth tax:


● €800,000 to €1.3 million: 0.50%

● €1.3 million to €2.57 million: 0.70%

● €2.57 million to €5 million: 1%

● €5 million to €10 million: 1.25%

● €10 million+: 1.5%


To review, non-residents are only subject to taxation on their French assets, while citizens are taxed on all of their assets around the globe. Residents of France are subject to a wealth tax ceiling, which dictates that the sum of all taxes paid cannot be more than 75% of their income.


French tax on inheritances and bequests


The French inheritance tax is notoriously difficult to understand. Even if the recipient does not live in France, French inheritance tax must be paid on any assets located anywhere in the world that were owned by a dead person who had been a resident of France. This applies to any estate that is headquartered in France.


Exemptions from paying French tax on international assets are provided through several bilateral tax treaties with France that are available to non-residents.


The inheritance rates for parents, children, and grandchildren are as follows, in general, after any relevant deductions and exclusions, as well as after adding back any gifts given from the dead during the past 15 years:


Allowance exempt from taxation: 100,000 Euros


● Up to €8,072: 5%

● €8,072–€12,109: 10%

● €12,109–€15,932: 15%

● €15,932–€552,324: 20%

● €552,324–€902,838: 30%

● €902,838–€1,805,667: 40%

● €1,805,667+: 45%


After a French tax refund of €15,932, the tax rate for siblings of the dead person is 35% for sums up to €24,430 and 45% for amounts more than that. The tax rate for others is between 55% and 60%, depending on the nature of their relationships. Our comprehensive reference to the inheritance tax in France contains more reading material.


Company taxes and VAT rates in France


It is possible to be taxed in France according to the personal income tax system (Impôts sur le Revenu, IR) or the corporation tax system (Impôts sur les Societiés, IS) when you are the owner and operator of your own business in the country. Under the new micro-enterprise regime, whether you are a single proprietor or a freelance worker, you are required to pay taxes and social charges depending on the turnover (revenue from your business) of your company. This is done via the micro-fiscal simplifié system.


In France, the tax rates paid by corporations have been progressively decreasing, and the majority of businesses are currently required to pay a rate of 25% regardless of their earnings. You may learn more about French corporation taxes by reading our guide, which also includes information on how to establish a company in France and how to work independently in France.


Tax advise in France


It is a good idea to hire an accountant if you are going through your first tax cycle in France or if you have to manage several tax regulations, such as if you are self-employed or if you have inherited some money. If any of these apply to you, it is best to seek professional assistance. They can provide you with advice on your available financial choices and assist you in avoiding blunders as well as penalties.


Useful resources


● The website of the French civil service is called Service-Public, and it contains comprehensive information on all elements of personal and commercial taxes as well as social costs.

● The body responsible for the collection of income tax in France is the Ministry of Economy and Finance.


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