Breizh Poellrezh SF - Douarañ Santel
Breizh Poellrezh SF - Douarañ Santel

Income Tax

If you are domiciled in France you are liable to pay income tax. The French tax laws are complex and there will be winners and losers in comparison with the UK system.

Long term residents frequently choose to take French citizenship because foreigners are subject to an increasingly heavy burden of personal taxation.

There is an outline of the system below. Detailed information is available from a French government interdepartmental economic agency - Delegation a l'Amenagement du Territoire et a 1'Action Regionale (DATAR). Their UK address is:

21-24 Grosvenor Place
London
SWlX 7HU

Tel: 020 7823 1895

Essentially DATAR's UK office is intended to offer fiscal advice for anyone considering selling to the French market, or setting up a business in France itself. Their publications include helpful advice on personal taxation. Their address in France is:

1 Avenue Charles Floquet
75007 Paris

Tel: 01 47 83 61 20 or 01 40 65 12 34

Those who have ever worked in France will be aware that there is no Pay As You Earn.

Income tax is not deducted at source from salary income although social security contributions – the French equivalent of National Insurance Contributions – are. Although thing may be about to change as a form of PAYE is being introduced.


Instead tax on employment income is payable in arrears after the tax year has ended in either three or ten instalments - as is income tax from any other source.
At present all tax is calculated from tax returns submitted during thew "silly season" April to June each year.

There are several reasons for this. Traditionally, France does not finalise the income tax rates until at some point during the tax year, or even, in some cases, after the tax year has ended.

And because the rates are not known in advance, there is no way of being able to deduct tax at source from the income, unlike with say bank interest, which is taxed at a fixed rate.

French income tax is assessed on a family basis. The husband is responsible for the return which includes the income of his wife and children who are still in the educational system, or doing their military service. Divorced, separated or widowed persons claim allowances according to circumstances. Across the board allowances include:

 

  • Money spent on major property repairs
  • Money spent on certain 'green projects' such as the installation of solar energy panels for heating
  • Payments for maintenance and dependent relatives other than children
  • Gifts to certain charities
  • Contributions to the Securite Sociale
  • Approved life assurance premiums
  • Interest payments on certain loans
  • Speci al arrangements for single parents with young children.


Taxable income is worked out by deducting allowances from total income and dividing the net figure by:
 

  • One for a single person with no children
  • Two for a married couple with no children
  • 2.5 for a married couple with one child
  • An extra 0.5 for each additional child. A married couple with four children will divide by four


When a taxable income has been worked out the rates that apply fall into a banded structure. The following are approximate figures for those incurring an incoming tax liability in France in 2016. They are based on indexing the tax authorities 2015 figures. The following bands should therefore be treated only as a rough guide:

The first 9,700€ of taxable income is tax free

 

Between €9,701 - €26,791 14%

Between €26,792 - €71,826 30%

Between €71,827 - €152,108 41%

Above €151,108 45%

A married couple with no children, no allowances and a joint income of €41,666 would pay tax as follows:

Half of €41,666 is €20,833, so each has a taxable income of €20,833

On the first 9,700€ no tax is paid
On the next11,133€ at 14% =  1558.62€
Total 1558.62€
Thus their joint tax bill would be (1558.62€ X 2) 3,117.24€

The same couple living in England would automatically have personal allowances of €11,500 each. Their tax bill would look like this:

Individual taxable income 20,833€ - 11,500€ = 9,333€
Tax on 9,333€ @20% = 1,866.60€
Total = 1,866.60€

Thus their joint tax bill would therefore be double 1,866.60€ or €3,733.20.

NOTE: £1 equates to 1.15€

The French tax system benefits large families and those on relatively low incomes. The tax year runs from 1 January each year and bills are paid in three equal instalments in the year following the liability.

Filling in a tax return is difficult because of the complexity of the system and the amount of technical language involved. English-speaking residents paying income tax in France invariably require the services of an accountant.

When the authorities suspect that tax declarations are inaccurate or fraudulent they will investigate. In certain circumstances residents with complex tax affairs (including perhaps income from a number of sources outside France) will be assessed according to the punitive regime de d'imposition forfaiture.

Using this system income is assessed according to arbitrary norms. This includes ascribing a letting value to all properties you own and multiplying it by a factor of three or five. Cars are valued and taxed at 75% of maximum new showroom value, servants are assumed to have massive salaries, and race horses are reckoned to be winners.

The system is rarely applied but it demonstrates what can happen to those who fall foul of the tax authorities.


Other Payments to be Made from Income

Social Charges


Social charges are an additional tax levied on income and capital gains. They are effectively another form of income tax in France, payable on all forms of income (and capital gains) received by French residents, including pension income.

The rates of social charges for 2016 was:

  Salaries/Business Pensions Investments/Rents/Capital
CSG 7.5% 6.6/3.8%* 8.2%
CRDS 0.5% 0.5% 0.5%
 Prélèvement Social 0% 0% 4.5%
Contribution Additionnelle 0% 0% 0.3%
Prélèvement de Solidarité 0% 0% 2.0%
       
TOTAL 8.0% 7.1/4.3%* 15.5%

*reduced rate if you pay less than €61 in income tax

 

Social charges are calculated based on the income declared in your tax return. The French authorities will send notification (avis d'imposition) of the amount payable in the autumn following the submission of your tax return.

Social charges are made up of three elements:

1. CSG (Contribution sociale généralisée)
2. CRDS (Contribution au remboursement de la dette sociale)
3. PS (Prélèvement Sociale).

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