When it comes to taxes, France often carries a reputation for complexity and expense. While overall rates of taxation tend to be on the higher side, the story shifts when we delve into income tax. Surprisingly, rates can be quite reasonable, especially for families with average means. Let’s unpack what expats in France should understand about French income tax.
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Do expats need to pay French income tax?
The pivotal question for expats in France is whether they are liable to pay income taxes. If you are legally residing in France, you are required to declare your global income on your annual French tax return. Consequently, you become subject to French income tax on your earnings. Nonetheless, there are specific scenarios in which non-residents may also incur French income tax. This might include situations where French residents pay their income tax in a foreign country due to the double-tax treaty between the concerned nations.
French income tax: A closer look for expats
For expats in France, income tax encompasses a broad spectrum of earnings. This includes income from employment, self-employment or business ventures, as well as returns from investments, savings interest, pensions and property rentals. Before we delve into French tax rates and allowances, it’s crucial to grasp how French income taxes are computed.
The concept of a fiscal household
In France, income tax is computed based on your ‘fiscal household’ (foyer fiscal in French), differing from many other countries where each individual taxpayer is assessed separately. This implies that if you are married or in a PACS civil partnership, you will file a joint tax return. Taxes are calculated based on the total income of your fiscal household (which combines you and your partner’s income) and your ‘quotient familial‘ (the total number of family members comprising your household).
A family with dependent children will pay less tax compared to an individual or a childless couple. Ig you are single, separated or divorced, your fiscal household includes yourself and any dependant children living with you.
Balancing income tax with social charges
While France is often synonymous with high taxes, it’s important to recognise that the majority of income-related taxes stem from social charges (prélèvements sociaux or contributions sociales) rather than income tax. Income tax rates, commencing at 11% post a tax-free allowance, can actually be much lower than some other countries, especially when factoring in the quotient familial mentioned earlier. However, the addition of social charges can sometimes skew this initial figure.
Understanding the 'prélèvement à la source'
Since 2019, a prélèvement à la source system has been implemented throughout France. This system applies to all forms of employment income, retirement income (including state pensions and annuities), sick pay, maternity leave, and income generated from rental properties. A standard French payslip now itemises both impôt sur le revenue (income tax) and charges social (social charges).
Annual tax declarations
In France, every resident above the age of 18 is obliged to file an annual tax return. This is a legal mandate, and it falls upon you to declare all your global earning. Tax returns can be submitted from April each year, with the final deadlines in late May or early June, contingent on your specific department in France. This affords you roughly two months to complete your return, a far more condensed window compared to certain countries like the UK, which allows nearly six months. In France, the tax year spans from January 1st to December 31st, and you will report your previous year’s earnings in April-June of the subsequent year. For instance, in 2022, you would declare your global income from 2021.
> You might be interested in this article: Income declaration in France on impots.gouv.fr
French income tax rates: What expats can expect
Now that we’ve laid the foundation for understanding the French income tax system, let’s delve into the applicable tax rates and tax-free allowances. France’s barème de l’impôt (tax scale) for the year is typically disclosed towards the end of the year, with the tranche du barème (tax bands) calculated in alignment with annual inflation rates.
For instance, the 2023 income tax rates were announced in late 2022 and will be applied to your 2023 tax return (tax on your 2022 income).
French income tax rate for 2023
The amount of income tax imposed on your 2023 income (as declared on your 2023 tax return) spans from 0% to 45%. It is computed based on the following tax bands:
- Up to 10,777 €: 0% tax rate (this serves as your tax-free allowance)
- From 10,778 € to 27,478 €: 11% tax rate
- From 27,479 € to 78,570 €: 30% tax rate
- From 78,571 € to 168,994 €: 41% tax rate
- Over 169,994 €: 45% tax rate
Income taxes for businesses and self-employed workers
It’s imperative to note that distinct tax rules may apply to businesses and self-employed individuals, particularly those under the auto-entrepreneur scheme. Seeking counsel from registered accountant or international tax advisor is highly recommended when embarking on a business venture or establishing oneself as a freelance in France. This ensures a comprehensive grasp of your tax responsibilities and liabilities.
Filling your tax return in France
As highlighted earlier, every French resident must complete an annual tax declaration. This can be accomplished online through the French tax website, allowing you to save and modify your declaration prior to submission. Claims for tax refunds, rebates, or other requests can also be processed online.
The process slightly varies for your initial tax return, which necessitates physical documentation. Additionally, if you possess foreign savings, investments, or income to declare, there are specific inclusions you should be aware of.
Step-by-step guide to filling your tax return
- Gather all necessary documents: Before you begin the process, ensure you have all the required documents on hand. This may include: Identification documents, proof of income, details of deductions and credits, bank statements, details of foreign income and assets.
- Access the French tax website: Go to the official French tax website, which provided an online platform for filing tax returns. The website is user-friendly and offers options for English-language navigation.
- Create an account: If you haven’t done so already, you’ll need to create an account on the website. This typically involves providing your personal information and creating a secure login.
- Choose your tax form: Depending on your situation, you’ll need to select the appropriate tax form. There are different forms for various types of income, deductions, and credits.
- Complete the form: Carefully fill in all the relevant sections of the tax form. The website often provides guidance and explanations for each section. Take your time and double-check the information you input.
- Declare your income: This is a crucial step. Declare all your sources of income, your sources of income including earnings from employment, employment, rental income, dividends and any other forms of income.
- Claim deductions and credits: If you are eligible for any deductions or credits, make sure to claim them. This can help reduce your taxable income. This could be childcare expenses, renewable energy credits, donations and charitable contributions, investment income tax credits, foreign tax credits in you pay tax in another country.
- Submit your tax return: After confirming that all details are accurate, submit your tax return through the online platform. You will receive a confirmation of submission.
- Pay any taxes due: If you owe taxes, ensure you make the payment by the specified deadline. The website typically provides options for making secure online payments.
Additional tips:
- Keep records: Maintain copies of all documents related to your tax return, including income statements, receipts and correspondence with tax authorities.
- Stay informed: Be aware of any updates or changes in tax laws that may affect your filling.
- Consider professional advice: If you have complex financial situations or if you are unsure about any aspect of your tax return, consulting a tax advisor or accountant can provide valuable assistance.
Useful resources for navigating French income tax
Official French tax website: The official website of the French tax administration provides a wealth of information, forms, and resources in English to help expatriates understand and navigate the French tax system. Visit the website here.
Embassy or Consulate Services: Contact your home country’s embassy or consulate in France. They may provide resources, workshops, or referrals to tax experts who can assist expatriates with their tax obligations.
Online tax calculators: There are online tools available that can help you estimate your income tax liability in France based on your income, deductions, and credits. These can serve as useful planning tools. Use this tool.
