Taxation

Taxation

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If you have plans to settle in France and would like to know more about your tax situation, you should be aware that you may be eligible for very advantageous tax arrangements, subject to certain conditions.

Determining tax residency

 

Tax residency is not a matter of choice; it depends on legal or reciprocal agreements and treaties.

 

 Helpful tip: Registration with the French social security system has no bearing on determining tax residency.

 


Irrespective of nationality, you will be considered to be resident in France for tax purposes if one of the following criteria is met:

  • Your permanent place of residence is in France, i.e. your habitual place of residence or that of your family (spouse and children).
  • If you have dual permanent residence, the center of your financial and personal interests is in France.
  • If your center of interests cannot be determined, your primary place of residence is in France (residence in France for more than 183 days in the same year).
  • In the absence of any other deciding criteria among the above (primary place of residence or no place of residence in either country), your tax residence will be in France if you hold French nationality.
  • Failing which, the tax authorities in the two countries may be asked to decide upon your tax residency. 

Residents of France are taxed on the entirety of their income earned from French sources or from foreign sources.

International tax treaties may also provide for specific arrangements.

For further details, please see the list of bilateral tax treaties that France has signed.

A number of special tax exemption schemes exist, particularly for expatriates.

 

For further information on accomodation taxes, please see our Accomodation section.

Tax residents

 

People resident in France for income tax purposes must file an annual income declaration, either online or by completing a paper copy of the form.


How is tax calculated?


Tax is calculated on the basis of the combined incomes of the household.

Income to be declared may come from various sources (wages, salaries and allowances,  pension annuities, property income, etc.).

For further details, please visit the impots.gouv.fr and service-public.fr website.

A tax household is defined as the taxpayer, their spouse and dependent children.

The household’s total income is divided by the number of household units, as follows:

  • One unit for each adult.
  • One half-unit for each of the first two children.
  • One unit for each child thereafter.

The effective tax rate on total household income is thereby determined on the basis of the size of the household.

 

What tax rates apply?

A French tax resident’s income is taxed at progressively higher rates:

  

Progressive tax rates in 2017
 

 2016 income bracket

(by allowance unit)

Tax rates in 2017 
Income up to €9,710 inclusive  0%
From €9,711 to €26,818 inclusive  14%
  From €26,819 to €71,898 inclusive  30%
From €71,898 to €152,260 inclusive

 41%

  More than €152,261  45%

 

Tax simulator


An income tax simulator can be consulted online to determine whether or not you are a tax resident, and to estimate the amount of tax due.

 

Helpful tip: Income tax withholding (‘pay as you earn’) is due to begin on January 1, 2018. For more details, please visit the economie.gouv.fr website.

 

Special exemption scheme for expatriates

 

A special exemption scheme for expatriates exists to help attract company directors and employees to France by providing partial income tax exemption and diminishing their liability for the ‘wealth tax’ (impôt de solidarité sur la fortune – ISF).


Conditions


The scheme is open to employees and company directors, regardless of nationality, coming to work full-time in France on condition that:

  • They have not been a tax resident in France during the five years prior to the date they commenced their post.
  • They are resident in France for tax purposes.


Advantages


The expatriate exemption scheme applies for up to eight years starting in the first full year after expatriates assume their new position.


Beneficiaries of the system receive exemption on:

  • Additional remuneration directly related to their work in France, i.e. expatriation bonuses as set out in their employment contract.
  • On part of their remuneration corresponding to work performed abroad, on condition that the trips made outside France are for the exclusive benefit of the company.
  • Many mobility-related allowances (e.g. payments for a reconnaissance trip, agency fees, moving fees and travel costs, school fees, etc.).
  • Half of all income from securities, capital gains from transfers of shares and ownership interests.
  • Wealth tax (impôt sur la fortune – ISF) on their assets located outside France.
  • Social security contributions paid to a scheme in a foreign country.

Total exemptions are capped at 50% of all remuneration or, alternatively upon request, 20% of taxable income earned for work performed abroad, excluding expatriation bonuses.

In addition, effective January 1, 2017, compensation and benefits related to the expatriate’s activities are now exempted from the payroll tax.

Non-residents

 

People in France who are not tax residents are only taxed on income from French sources. Remuneration paid in return for work carried out on French soil is therefore taxable in France.

Unless otherwise provided for by a tax treaty, salaries paid to non-residents are subject to tax deducted at source.

Non-resident salaried employees are still required to file an income tax return with the French tax authorities, and, if necessary, pay any difference between the amount deducted at source and the tax due.

In order to avoid double taxation, tax deducted at source in France gives rise to an equivalent tax credit in the country of residence (depending on the tax treaty between France and the country of residence).

 

Helpful tip: Most international taxation treaties make provision for temporary postings. An employee residing in France for less than 183 days does not owe tax on income earned through their work in the country, as long as their remuneration is paid by or on behalf of an employer which is not established in France.

 


For further information on taxation for non-residents, please visit the impots.gouv.fr website..