France has a reputation as a high-tax country, but there are many benefits. Tax in France is collected by the department of the Trésor Public and administered by Direction Générale des Impôts.
The government has produced a guide for English speakers called The French Tax System.
VAT (Taxe sur la valeur ajoutée - TVA) is a consumption tax paid on certain goods and services purchased in France. This is included in the sale price of these goods and services.
4 rates of VAT
- 19.6 percent - standard rate
- 7 percent - reduced rate for books, restaurants, transport, renovation/improvement works, press publications and certain medical drugs
- 5.5 percent - reduced rate for food, water and non alcoholic beverages, special equipment for the disabled and school canteens
- 2.1 percent - special rate for medical drugs reimbursed by the French social security
Taxe d'habitation - Occupier's tax is paid by the occupant of a property. It is calculated on the basis of the notional rental value of the property. This is assessed by the land registry (cadastre). This is paid by the tenant if the property is rented out. A demand for payment is sent each year and must be paid by the specified date. Failure to so will incur a 10 percent penalty.
Taxe foncière - Paid by the owner of the property, irrespective of who occupies it. The tax is divided into two parts
Tax on the buildings (taxe foncière sur less propriétés bâties) - Taxed whether or not it is actually occupied. New houses are not taxed for the first two years after construction.
Tax on the land (taxe foncière sur less propriétés non bâties)
Individuals resident and non-residents with assets in France are taxed on the basis of their assets as of 1 January each year. Known as Impot de Solidarité sur la Fortune (ISF), residents are liable to wealth tax on their net worldwide assets. Non-residents are only liable for wealth tax on their net French assets.
Taxable assets: Real estate, cars, other vehicles, debts due to the taxpayer, furniture (except antiques), horses, jewelry, shares, bonds and the redemption value of any life assurance
Exempt assets: Necessary to a business conducted by its owner or their spouse; pictures, tapestries, statues, sculptures, lithographs, antiques over 100 years old; funds in a pension fund constituted in respect of an employment or business
If the household total net wealth is below €1.3 million, no wealth tax is due and no return is required.
Wealth between €1.3 - 3 million is taxable at a flat rate of 0.25 percent.
Wealth exceeding €3 million is taxed at a flat rate of 0.5 percent.
Tax Resident of France
A person becomes a French tax resident from the day they arrive in France if they intend their stay to be permanent or indefinite. Otherwise, it will be from whatever other point they can be viewed as having commenced residence where at least one of the four following tests is fulfilled:
- France is the main residence. If a spouse and children live in France, a person will also probably be considered a French tax resident even if they work abroad.
- France is the principal place of abode (lieu de séjour principal). This usually means more than 183 days in France in a calendar year, but it does not need to be continuous.
- If a foreigner spends less than 183 days in France, they may be tax resident if they have spent more time in France than in any other country.
- Principal activity is in France, like their occupation.
- France is the country of a person's most substantial assets (centre of economic interests).
If a person is also a tax resident under the domestic rules of another country, then "tie-breaker" rules exist to establish where taxes need to be paid.
Tax residents are liable to pay tax on their worldwide income (impot sur le revenu). Earnings, pensions, rental income and some other forms of investment income are taxed at progressive scale rates that range from 0 to 41 percent.
Tax Rate on Net Income
- 0 percent on up to €5,963
- 5.5 percent on €5,964 to €11,896
- 14 percent on €11,897 to €26,420
- 30 percent on €26,421 to €70,830
- 41 percent on over €70,830
The taxable income to be assessed is the total income of the household. The income of a married or civil partnership is divided into two parts, with an additional half part for each of the first and second children, and a whole part for the third and each subsequent child.
There is also a fixed rate on bond or bank interest at 24 percent and capital gains at 19 percent and 21 percent on dividends. In addition, social charges of 13.5 percent are added to these rates.
BNC (Bénéfices Non Commerciaux) applies to all forms of non-commercial income. If the gross annual income is below €32,600, it will usually be assessed under the Micro-BNC regime which allows the taxpayer to deduct 34 percent for expenses. This means that 66 percent of the gross income is taxable. If the annual income exceeds that threshold, or the taxpayer opts out of the Micro regime, they will be taxed under a regime whereby the actual income net of expenses of the business is taxed.
BIC (Bénéfices Industriels et Commerciaux) applies to commercial, traditional trading income, income from furnished lettings. Gross annual income below €32,600 allows for a flat 50 percent deduction. For the sale of goods or the provision of gîtes rental accommodation, gross income of less than €81,500 is assessed at 71 percent of income.
Income tax is paid in the year after the income is earned before the filing deadline of May 31st. No income tax is deducted at the source of income. It is the individual's responsibility to ensure that they are able to afford their tax liability when it is time to report.
A statement (avis d'imposition) is sent in the third quarter and payment is due before November 15. Once the statement has been received, a household may apply to pay in one lump sum, by monthly direct debit or in one, two, or three instalments. If the tax bill is lower than €337, it must be paid in a single payment by the due date. Payments must commence by December 15.
Tax returns may be completed online by identify yourself with your Numéro FIP and Numéro de rôle. Paying online extends the deadline into June (dates vary depending on the location in France).
If you have a complaint, you first must pay your taxes (unless you are given a specific instruction from the tax office). An independent conciliation service is attached to each main tax office. Complaints may be addressed to them. You may also contact an independent Ombudsman (Médiateur du Minéfi) at the Ministry of Finance.
If you earn money in multiple countries, you may need to pay tax in multiple countries. To avoid taxing it's citizens twice, many countries (including France) have a double taxation treaty. Countries agreements vary, but many offer the ability to receive tax credit equal to the tax paid in another country.